1. Investor’s View
Return on Investment ratio: Net Income as a percentage of the Shareholders’ Equity.
ROI measures how effectively the Shareholders’ investment has been put to work to create profit.
This is the same as Return On Equity (ROE).
2. Manager’s View
The benefit obtained from any internal improvement or expansion, expressed as a percentage of the cost. This ROI forecast allows the Finance Department to choose between competing proposals for improving the business, by seeing which ones provide the biggest bang for the buck.
Return on Investment (ROI) ratio =(Value of Improvement−Investment) as a percentage of Investment
Example: The Round Number CompanyValue of Improvement = 200; Cost to implement impropvement = 50 Return on Investment = (200-50)/50 = 300% |
term list.