Return On Investment

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What is Return on Investment? DescriptionROI is an accounting valuation method. The ROI is a return ratio that compares
the net benefits of a project, versus its total costs. For example, if a project
has an ROI of 300%, the net benefits derived from that project are three times
those of the expected total costs to implement the project. As such, the ROI
calculation represents the relative value of the project's cumulative net
benefits (benefits minus costs) over the analysis period, divided by the project's
cumulative total costs, and expressed as a percentage. Because the numerator (Net Income) is an unreliable corporate performance measurement, the outcome of the formula for ROI must also be unreliable to determine success or corporate value. However the ROI formula still shows up in many annual reports... Return on Investment overstates economic valueThe degree to which ROI overstates the economic value depends on at least 5 factors.
Calculation of Return on Investment. FormulaNet Income / Book Value of Assets = ROI A better alternative is: Net Income+Interest (1Tax Rate) / Book value of Assets = ROI Book: Steven M. Bragg  Business Ratios and Formulas : A Comprehensive Guide  Book: Ciaran Walsh  Key Management Ratios 
Compare with Return on Investment: EBIT  EBITDA  Total Cost of Ownership  Relative Value of Growth  Economic Value Added  Earnings Per Share  Return on Equity  Net Present Value  Return On Net Assets  Return on Invested Capital  CAGR Return to Management Hub: Decisionmaking & Valuation  Finance & Investing 

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