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Understanding Return on Investment

Understanding Return on Investment

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Whether a business owner, manager, or investor, you're undoubtedly concerned with achieving maximum profit and maintaining effective management. One way to measure these two standards is by using return on investment (ROI), the most commonly used indicator of company profit and management performance. Knowing the ins and outs of ROI is essential, and while it's easy to understand the importance of this concept, it's not always easy to understand ROI itself. Understanding Return on Investment clarifies and explains all the fundamental elements of this important financial tool, making it one you can use comfortably and successfully.

Written by two authorities on the subject, this comprehensive guide explains in detail all major aspects of figuring and analyzing costs versus returns of projects and acquisitions. With charts, graphs, and examples drawn from actual companies, Understanding Return on Investment shows you what the two major components of ROI are, where they originate, and how they should be controlled in your business. It highlights the various forms of ROI, including GMROI (gross margin return on investment) and CMROI (contribution margin return on investment), and how they provide different measures for evaluating investment activities.It covers the DuPont system of financial control, ROI's relationship to return on equity (ROE), solvency ratios, and decentralized management. With this concise, clearly written guidebook, you'll learn:

  • How ROI is used to evaluate both external and internal operations
  • ROI's impact on long-term business decisions
  • How managers analyze sales revenues and costs
  • The use of weighted average cost of capital (WACC) in making investment decisions
  • The problems associated with using ROI

Straightforward and easy to follow, Understanding Return on Investment is the ideal tutor and reference source for everything you need to know about the basics of this important concept and beyond.

Sending an SOS when it comes to ROIs?

Help is on the way . . .


Unclear on the concept of return on investment (ROI)? Lost in all its complexities? Return on investment plays a major role in business, but it can be a difficult concept to grasp. That's why you need this information-packed, comprehensive guide. From explaining exactly what ROI is to examining its finer points, Understanding Return on Investment covers all the bases on this important business tool. You'll find information on:

  • How to calculate ROI
  • The effect of ROI on investment and disinvestment decisions
  • How ROI is used to evaluate managers
  • Important ratios that interact with ROI
  • The use of ROI in evaluating investment centers in a decentralized operation
  • The relationship of ROI to ROE (return on equity)

If you use ROI, but are confused or unclear about some of its details, you'll definitely profit from Understanding Return on Investment, a complete guide to this all-important performance indicator.

Cover Design: Keithley & Associates, Inc.