Saturday, March 1, 2008

Expanded ROI Formula

ROI = income ÷ invested capital

Expanded Return on Investment (ROI) Formula

ROI = income ÷ invested capital
ROI = (income ÷ sales) x (sales ÷ invested capital)
ROI = sales margin x investment turnover ratio

Amount of profit earned on every dollar invested.

Underlying reasons of Return on Investment (ROI) Equation

Profitability of Sales ---------- Profit/Sales Margin
Efficiency of Sales Generation --- Capital/Investment Turnover Ratio

Additional Accounting Examples and Explanations:

1 comment:

erickia said...

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