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Return on Investment.docx - Return on Investment ROI is...

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Return on Investment (ROI) is calculated with the following equation: “ROI = (Current Value of Investment - Cost of Investment) / Cost of Investment” (Chen, 2019). In order to improve the ROI, you must increase the value of the investment. By analyzing the company’s return on sales (ROS) and capital turnover, an accountant can determine why the value of investment is struggling. The problem may be that the company has poor ROS, meaning they do not produce enough profit per dollar of sales. Likewise, the company may have too many investors which results in high stockholder equity. This translates to spending too much of the company’s revenue on investors equity thus lowering the ROI. So, in order to improve ROI, you must first determine why the ROI is struggling by narrowing down the options and analyzing the ROS and capital turnover. From there, an accountant might
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Unformatted text preview:advise to make changes to the manufacturing process to increase ROS. By making the manufacturing process less expensive, the company is able to produce more profit per dollar of sales because they can spend less on manufacturing. In order to improve the capital turnover, the company may think about buying out other shareholders so they don't have so much equity to pay. Either way, they will be increasing the value of investment if they work on improving their ROS and/or capital turnover. Chen, J. (2019, March 12). Return on Investment (ROI). Retrieved from Bragg, S. (2018, March 24). Capital turnover. Retrieved from