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

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