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Understanding Return on Investment

  • ID: 2211553
  • Book
  • 256 Pages
  • John Wiley and Sons Ltd
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Sending an SOS when it comes to ROIs?

Help is on the way . . .


Return on investment (ROI) plays a major role in business, but it can be a difficult concept to grasp. Understanding Return on Investment shows you how to better utilize this essential tool by simplifying and clarifying all its important points. This invaluable guide includes information on:

  • The effect of ROI on investment and disinvestment decisions
  • The various forms of ROI and how they provide different measures for evaluating investment activities
  • The relationship of ROI to ROE (return on equity)
  • The use of ROI in evaluating investment centers in a decentralized operation
  • How ROI is used to evaluate managers
  • The use of weighted average cost of capital (WACC) in making investment decisions

If you use ROI, but are confused or unclear about some of its details, you′ll definitely profit from Understanding Return on Investment, a complete guide to this all–important performance indicator.

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The Importance of Return on Investment.

ROI and the DuPont System of Financial Analysis.

ROI and ROE.

Problems with ROI in Segments.

How ROI Affects Investment and Disinvestment Decisions.

Determining Profit and the Investment Base.

How to Value the Investment Base.

Gross Margin Return on Investment.

Contribution Margin Return on Investment.

Cash Return on Investment.

Analyzing Sales Revenues.

Analyzing Costs.

ROI and Decentralized Management.

ROI and Transfers Between Segments.

Weighted Average Cost of Capital.

The Time Value of Money.

Capital Budgeting.

Discounted Cash Flow Methods.

Payback and Accounting Rate of Return.

Comparison of Capital Budgeting Methods.

Important ROI Ratios.

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George T. Friedlob
Franklin J. Plewa Jr.
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