Key Management Ratios, 4th Edition

6

Operating performance

Return on investment (ROI)

• Return on equity (ROE)
• Return on total assets (ROTA)
• Standards of operating performance

But the age of chivalry is gone. That of sophisters, economists, and calculators, has succeeded; and the glory of Europe is extinguished for ever.

EDMUND BURKE (1729–1797)

Return on investment (ROI)

The generic phrase ‘return on investment’ relates to one of the most important concepts in business finance.

Each dollar of assets has to be matched by a dollar of funds drawn from the financial markets. These funds have to be paid for at the market rate. Payment can come only from the operating surplus ...