WHAT IS RETURN ON INVESTMENT (ROI) ROI THEORY ?

Let's look at return on investment (ROI) .



Return on investment (ROI) is one of the most important dimensions for your business.


ROI shows how effectively companies use cash and capital resources.


Small businesses can use ROI more effectively than Fortune 500 companies.


In general, limited resources can make small businesses more profitable by measuring ROI.


Business owners can choose a simple or more complex technology to measure their actual ROI.



WHAT IS RETURN ON INVESTMENT (ROI)  ROI THEORY ?
WHAT IS RETURN ON INVESTMENT (ROI)  ROI THEORY ? 


ROI THEORY


In theory, ROI is a simple concept.

One of the goals of any business is to earn more than $ 1 per dollar spent for investment, cost, or other purposes.

ROI technology measures the effectiveness of these efforts.

So an ROI of over 0.00% indicates that the company is making more money than spending or investing.

The higher the ROI, the more efficient your business is.

The roots of entrepreneurial ROIs are seen as the only measure of success.

ROI should be used in conjunction with other important business ratios to measure the overall condition of the enterprise.


ROI CALCULATION


To calculate ROI, keep small businesses so that they do not misunderstand.

For example, an employer has invested $ 10,000 in a company, and the current revenue is $ 2,200.

Divide profit ($ 2,200) by total investment ($ 10,000) to find out that this year's ROI is 0.22 (22%).

Bigger, publicly traded companies face more complex formal construction because they have common and preferred stock, long-term debt and other potential "investment" issues.

Small businesses need to create the reality of success with all their investment.

Often, owners sometimes "forget" the amount of injected into the company, making ROI rates inaccurate.


DECISION SUPPORT USING PLANNED ROI


ROI technology is useful for analysing potential results and making "start" or "no" decisions.
Large and small businesses need to save capital and minimise risk. Businesses can use estimated ROI numbers to make safer, more profitable decisions.


For example, a small business that is considering adding retail outlets can anticipate net income (benefit) in light of the costs expected to acquire and maintain this outlet.

The owner or manager can include space rental costs, estimated inventory, staff and other operational costs. This is their sure investment.

You can determine if the expected ROI is justifying the decision as a result of dividing the estimated revenue by the expected investment cost (cost).


A zero or negative ROI means a "No Go" decision, and a normal, positive ratio helps to make a "Go" decision.


ROI TECHNIQUES FOR PURE INVESTMENT


Using simple ROI formulas helps individuals and businesses determine their current investment and future outcomes.

For example, the original investment of $ 5,000 in securities is now $ 5,800.

Divide the $ 800 revenue by the original cost ($ 5,000) and you get an ROI of 16%.


This is a successful return compared to most bank-related investments.

I understand that ROI does not affect risk components.

This sample investment was very risky and investors could have been wiser to enjoy a 10% return on less volatile options.



This example demonstrates why individuals and small businesses need to use ROI techniques to manage their work, along with other authorised analyses.



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