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Return on Investment (ROI)
Definition
This term is used interchangeably with Return on Invested Capital (ROIC) which is expressed as the calculation of dividing earnings (before interest, taxes and dividends) by the enterprise's total capital (common and preferred equity plus long term funded debt ).
Using the term Return on Investment (ROI) :
ROI or ROIC is normally utilized to compare management teams of different companies or differnt product lines within a company to discover the efficiency and viability of deployed capital within that company or division.
Pay Special Attention To :
Return on Investment is just one way of many to measure investment returns. Be wary of the manipulation that can take place in earnings and do your home work.
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Related terms
Return on Equity (ROE)
