Return on Investment – Indicator for Measuring the Profitability of Invested Capital

Open access

Abstract

The decision of investment is a strategic decision and it is an integral part of the general policy of the company. The purpose of this paper is to present the manner in which the ROI (Return on Investment) indicator can be used in the analysis of investment projects.

Understanding the concept of investment is the first issue addressed. Then ROI is analyzed, highlighting the advantages and limitations of its use. They are addressed the aspects related to the manner in which the size of the ROI indicator is influenced by the method of valuation of assets, but also by the method of calculation of the working capital. The research results can be used by any investor to select based on ROI indicator, an investment project of several possible. As well, ROI may serve after completion of the investment to measure its profitability.

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