Management Indicating an Organizations Profitability Discussion Reply – Description
Respond to peer:
Hi Professor,
What do you think return on investment is intended to measure?
By comparing the gains or advantages obtained from the investment to the initial investment amount, ROI aims to evaluate an investment’s efficacy and performance. The main goal of ROI is to assess an investment’s financial performance by figuring out how well it produces returns. It gives information on the profitability and effectiveness of various investments, enabling investors, companies, and analysts to make wise resource allocation choices.
• What is the relationship between return on investment and return on assets?
Both ROI and ROA are financial measures used to gauge the effectiveness and profitability of investments, but they place differing emphasis on various factors.
ROI is a measure of an investment’s profitability in relation to its cost. It contrasts the profits or advantages from the investment with the sum that was first invested. A percentage is frequently used to represent ROI. On the other hand, ROA gauges how well a business uses its assets to produce profits. Regardless of how those assets were funded, it assesses the profitability of a company’s overall assets.
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