return on investment

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  • Return on Investment is utilized to find out the expected return from the investment compared to the cost of the investment. This is a very important concept to understand as a company because you don’t want to put money into something that won’t give you any kind of return. If a company makes a bad investment decision it could potentially be detrimental to the company or if they make a good investment decision then it could be great for the company. The ROI equation helps to understand the financial side of things however there is always other aspects that must be considered that are non financial. There are a few criticisms in regards to the return on investment such as it encourages a short-term orientation, departmental project rejection, and measuring issues. When looking at return on investment it is vital to look at the big picture and think about how this decisions will impact the company.

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