How effectively their resources are used to generate profits

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Reference no: EM133483982

Discussion Post: Management the Return on Investment

Question I. Return on investment is intended to measure the profitability or efficiency of an investment. Return on investment is commonly used by investors or businesses to evaluate the financial performance and attractiveness of an investment or project. By calculating return on investment, stakeholders can assess how effectively their resources are used to generate profits and make informed decisions regarding the future investment.

Question II. The relationship between return on investment and return on assets lies in the fact that both ratios provide insights into a company's profitability. However, they focus on different aspects of financial performance. Return on investment measures the return on the total investment, including long-term liabilities and equity. It is calculated as cost of investment divided by current value of investment minus cost of investment. On the other hand, return on assets measure the return generated by the total assets employed. It is calculated by dividing net income by average total assets. Return on investment can provide how efficiently a company or business utilizes its assets to generate profits.

Reference no: EM133483982

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