May 3rd, 2010

Return on Investment (ROI) analysis

Return on Investment (ROI) analysis is one of several approaches to evaluating and comparing investments. With ROI, decision makers evaluate investments by comparing the magnitude and timing of expected gains to the magnitude and timing of investment costs. A good ROI means that investment returns compare favorably to investment costs.

In the last few decades, this approach has been applied to asset purchase decisions (computer systems, factory machines, or service vehicles, for example), "go / no-go" decisions for projects and programs of all kinds (including marketing programs, recruiting programs, and training programs), and to more traditional investment decisions (such as the management of stock portfolios or the use of venture capital).

Source: Solution Matrix • Cost-Benefit-Analysis