
In business terms, Return On Investment (ROI) is one of the most important indicators of success. ROI in marketing is one of the most important financial indicators to reveal whether marketing activities have been successful or not. In short, when revenue can be linked to marketing activities, the marketing department can be confident that their work is paying off for the company.
One of the reasons every businessman must understand ROI is because it is the most accurate measure of business profits. By knowing ROI before making a business investment, all operational activities can be evaluated for the level of return on investment.In some cases, ROI is used to calculate how much an investment is worth. Like investors who want to know the potential ROI of an investment before providing any funds to a company. ROI is also used to describe the “opportunity cost” or return that investors provide for investing in a company.When your business puts their money into an investment or business venture, ROI can help understand how much profit or loss your investment is making. ROI itself is a simple ratio that divides the net profit (or loss) from an investment by its cost. Because it is expressed as a percentage, you can compare the effectiveness or profitability of different investment options.
The following are influencing factors Return On Investment:
Turnovers from operating assets or the turnover rate of assets used for operational activities, namely the rotation speed operating assets in a certain period.
Profit Margin, is the amount of operating profit expressed in the form of a percentage and the amount of net sales. Profit Margin can measure a company's level of profit and is linked to its sales.
ROI as a form of profitability ratio analysis technique is very important in a company. Entrepreneurs can find out how efficient the company is in utilizing assets for operational activities and can provide information on the size of the company's profitability.However, knowing what ROI is and how to calculate it can help to analyze an investment that will be made. With proper analysis, company efficiency will be easier to improve. The profits obtained will be even more satisfying, the company will progress further.
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