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Return on Investment

 

Retirement Business Return on Investment Calculator

[CP_CALCULATED_FIELDS id=”13″] Return on Investment Explanation

Formula

Net Income / (Long-term Liabilities + Equity)

ROI and related metrics provide a snapshot of profitability, adjusted for the size of the investment assets tied up in the enterprise.

Marketing decisions have obvious potential connection to the numerator of ROI (Net Income), but these same decisions often influence assets usage and capital requirements (for example, receivables and inventories).

As a decision tool it is simple to understand. The simplicity of the formula allows to freely choose variables e.g., length of the calculation time, if overhead cost should be included, or details such as what variables are used to calculate income or cost components. To use ROI as an indicator for prioritizing investment projects is risky, since usually little is defined together with the ROI figure that explains what is making up the figure.


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