Sunday, December 12, 2010

Return on Investment

"To invest or not to invest, where to invest and when?" - these are the questions top business leaders must answer on a daily basis.

Return on Investment (RoI) comes to the rescue of business leaders to answer the above questions. RoI simply means the returns must justify the investments.

Mathematically and Economically speaking:


Cash (I) = Cash invested
Cash (Ri) = Cash earned at time point i

TI (Total Investment) = Cash (I)
TR (Total Returns) = Summation of Cash (Ri) over all i

IF TR > TI by more than a defined percentage
THEN Invest
ELSE Don't Invest

The "more than a defined percentage" is the Rate of Return.

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