This in an excerpt from this book
Since the dawn of time, we have been interested in knowing the returns we can get when we invest time or money in anything. It didn’t always have a formula to calculate or measure the return, but there was the interest of knowing what a person will get out of the investment he makes. Whether it is profit or loss in terms of money or returns in kind, knowing that return can be expected makes a venture desirable. The word “returns” has a very special place in business. Every business venture begins by identifying how the venture will enable the business owner to earn returns from the investment they make.
Returns on Investment (ROI) is the result of our need to find out what we could earn through an opportunity or a prospect. It compares the costs involved with the benefits that stem through the opportunity. It helps the person find out if they will be able to earn more than the costs that are involved which eventually results in a profit. Everyone is interested in knowing if they will be able to earn more than what they invest or spend on a venture.
The purpose of Return on Investment is to help business owners and investors find out if an investment is worthy enough or not. Finding out if the returns will lead to profits or not can help the person find out whether they should invest or not. It also works as an indicator which compares various investments in an investor’s portfolio. Investments that have the highest ROI are considered to be priority. It is considered to be a useful metric for investors as well as marketing leaders.
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