Return on Investment

Return on Investment or ROI is often viewed as a test of management's efficiency in using available resources.  Regardless of the size of the company, capital is considered a scarce resource and should be used efficiently.  The concept of Return on Investment can be applied not just to the company itself, but within the company to evaluate a subsidiary, a department or even an individual product.

There have been a number of measures that leverage the concept of Return on Investment.  Each of these measures or ratios is well suited to a particular situation.  The three most common measures using the return on investment concept are:

• Return on Assets
• Return on Equity
• Return on Capital