Return on Investment

In newly created businesses as well as in those that are growing it is essential to know the return on investment that they have, being an entrepreneur entails the great responsibility and capacity to take risks. The truth is that we must be smart and assume that failure will be assured if we do not make a decision by being aware of our numbers. What do I mean, numbers? To your finances. When you find yourself in this situation there come moments of doubt, not knowing if you are on the right path. For this there is ROI, which are the initials for Return On Investment, return on investment in Spanish. This method of financial evaluation measures the return on our investment, as it compares the net benefits of any project with its actual costs over a given period of time. As the budget of our company increases the calculation of the return on investment becomes more important. It helps us to know the profitability of the expenditure that is being or is being planned. Calculation of return on investment (ROI) This is calculated on the basis of the profit or total profits obtained and the total investment of the project, i.e. the case expected to be obtained. ROI = (profit obtained – investment)/investment* 100 The profit or profit obtained (or expected) subtracts the investment made and this result is divided between the cost of the investment. The result multiplied by 100 gives us our return on investment (ROI) percentage. So we can ensure that our share will be the return on our investment. For example: If you have an investment of 20,000 and thanks to this investment you increased profits, you went from earning 10,000 to earning 35,000 the profit obtained in the same period of the investment was 25,000 your return on investment (ROI) would look like this: ROI = (25,000-20,000)/20,000 = 0.25 ROI = 0.25* 100 = 25% Which represents 25% of profitability for the investment made. Higher ROI plus return on investment. If it is very close to zero it is unattractive to invest and if it is negative you are definitely losing your money. Are you aware of the real value of your investment? One important thing to keep in mind is to monitor your finances and you can improve your investments to create a positive return on investment. The key to appropriating your investments ends directly in the control of your business process What about the financial means with which you have it? Are they reliable? There are different tools that simplify your numbers, you should start by fully knowing your business process and especially how to control it. Get to know the elements that make up the trading process and the comprehensive system of purchases, payments and inventories on the ebook: Commercial Intelligence. There are already hundreds of people who have read it.

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