HOMEWORK 7 - Personal Statement Example

Finance and Accounting Return on investment is a measure of funding which a company may apply in evaluating its performance. Through this approach, profits require consideration in a relationship involving capital invested. In other words, return on investment is a profitability ratio. Return on investment is given by the percentage of net profits per investment of any given firm or industry. The purpose served this return is for measuring the return rates in the amount of money that is invested in any economic entity.

The ration should not be the only one used in evaluating the suitability of an investment (Phillips, 2001). Other appropriate ratios include return on equity and return on capital employed. Return on equity is the percentage of net profits in relation to equity. This ratio is much more influential in the determination of return that investors releases to the company. The potential to this ratio extends to the determination of investors investment decision point. Return on capital employed is the percentage of net profit in relation to net assets.

Return on assets in relation to cash is another ratio used in the determination of return. This ratio is used in advanced profitability issues. The ratio is used to compare return on investment and cash comparison. The ratio is usually stated on an accruing basis. It is crucial to note the fact that these ratios are used for comparative analysis through the data given. Comparison of ratios should be compared with historical data that belong to the company and or industry.Return on investment= Net profit x 100 Total asset Is it wise for a company to lose money on one product if the product is vital to the sale of another extremely profitable product?

It is vital to conduct a net benefit analysis. This will determine the profitability level. A number of approaches can determine which product is profitable for the company. It is wise to employ the best decision strategy in arriving at the best point. Approaches used involve the net benefit analysis or the use of net present value method. In this approach, analysis is done for both products and discounting done by employing the best discount policy. The product that yields the highest net present value should be employed.

ReferencesPhillips, J.J., 2001. In Action: Measuring Return on Investment, Volume 3. New York: American Society for Training and Development