Return on Investment (ROI)

Return on Investment Formula

What is the return on investment and, what does it tell you?

Return on investment is a measurement that indicates the efficiency of return in the company compared to its investment.

What does it mean by a higher return on investment?

A higher ROI compared to the industry average indicates that the company is performing well.

What does it mean by a lower return on investment?

A lower ROI compared to the industry average indicates that the company is not performing well.

What does it mean by a positive return on investment?

A positive return on investment means the company is getting more returns compared to the investment cost.

What does it mean by a negative return on investment?

A negative return on investment means the company is making losses.

How to use return on investment?

A company with a positive high ROI may indicate that the company is performing well. So this can be a good opportunity for investors to consider investing money in the company. If the ROI is increasing with time, then that can be a plus point for the investor to select this stock into his watch list.

So never take decisions by only looking at ROI. Always analyze as possible by considering different factors like other ratios and business news. Always try to use multiple ratios combinedly to get a more clear picture of a company.

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