In: Finance
is an ROI of 4 or 400% good to expand a company?
Corporate training HRL 431
Return on investment (ROI) is a bussiness tool used to measure the income earning ability of various investment. ROI is measuring the perfomance of various investment rather than considering the cost of such inestments. ROI is calculated by dividing the return from an investment with the cost of such investment. The resultant figure will be expressed as a percentage or a ratio.The formula for ROI is as follows :-
ROI = ( current value of investment - cost of investment ) / cost of investment
The ROI can also be expressed in terms of amount which is = ( current value of investment - cost of investment )
In the given cases,Ie ROI = 4 and ROI = 400%,
ROI 4 means company is getting a return of $4 from the investment.
ROI = 400% is good to expand the company.because ROI 400% means the company is able to make a return of 4times of the cost of such investment.
Since the return of the second cases is much higher, Ie 400% the company can easily expand through the investment returns.