Return On Investment (ROI)

What is it? Also known as return on invested capital (ROIC). A measure of how well a companys management is performing. ROI is calculated by dividing earnings by total assets. It is a broader measure than return on equity (ROE) because assets include debt as well as equity. Companies sometimes define terms differently, but in general they use earnings before taxes and the book value of assets at the end of the year. Some investors think that ROI is the most important financial indicator because it shows how well management has used the companys resources. Companies with the same sales and earnings may look as if they performed the same. But a company that needed less investment capital to achieve the same result would actually be the better-run company. It is useful to compare a companys ROI with others in the same industry

Added By: Hailey

Send To Friends!

If you'd like to send the Return On Investment (ROI) definition to yourself or to your friends/colleagues, just enter the e-mail addresses in the boxes below -

We hope you now understand the meaning of Return On Investment (ROI). If you need any more information on this term, please don't hesitate to contact us.