Return on Investment (ROI)
A widely used financial metric that measures an investment's profitability by measuring the investment relative to its cost.
投资回报率是一种广泛使用的财务指标，可通过衡量投资相对于其成本来衡量投资的盈利能力。
在比较不同投资的成功以了解哪些项目最有效的项目时，投资回报率或投资回报率可能非常有用。
To calculate ROI, you divide the Return on the investment by the cost of the investment.
ROI = Return on Investment / Cost of Investment
财务专业人员使用ROI指标的主要原因之一是比较各种投资机会，并根据风险和回报对其进行排名。
该指标之所以受欢迎，是因为其直接对任何投资的适用性。无论是在股票市场上进行投资还是开设新餐厅，ROI都可以应用。
A positive ROI will indicate that this investment is economically efficient, and a gain will be received from this transaction.
However, if the ROI is negative, it can signal that there is a better alternative for investments that an investor can undertake, which will result in a gain.
Example of Return on Investment
我们将研究一些如何计算ROI的示例。
Assume you invested in the stock market in a company called ABC. One ABC share costs 100$, and after one year, you sell the ABC share for 150$.
ROI = 50$ / 100$ = 0.5 or 50%.
您的投资回报率为50％。这是经济上有效的投资，因为我们的投资回报率很高。
Examples like the investment in ABC stock above expose some limitations of using ROI, especially when comparing various investment opportunities.
Investing in a project is an extremely complex decision, and the ROI doesn't consider that the profitability of an investment is hugely affected by other factors, including taxes and interest,fixed costs, etc.
ROI无法解决time value of money,这表明明天一美元的价值比今天的一美元高，因为您可以投资这笔钱并赢得利息。
一些投资将需要更长的时间来生成及功率tive cash flows than others. However, that doesn't mean that they are bad investments.
这是投资专业人士使用其他艺术的主要原因之一NPV或IRR更有效地评估投资决策。
短缺的urn on Investment metric
当使用投资回报率（ROI）度量来评估投资的盈利能力时，出现了许多限制。
Some of the limitations include the following:
1. ROI忽略了项目现金流的时机。
The metric only considers the net gain of the investment or project and doesn't consider when the cash flows occur. Therefore, it makes comparing investments with different horizons harder.
2. The metric does not consider the investment's level of risk.
This can make it harder to compare projects with different risk levels.
3. It fails to consider the potential for future growth.
ROI is solely based on past performance and doesn't consider the potential growth an investment or project can make, limiting the comparison between businesses with different growth potentials.
Keep in mind that despite these limitations, the ROI metric is still used widely in evaluating investments. However, it is crucial to consider other metrics along with the ROI, like NPV or IRR.
Is there a specific good ROI an investor, should seek?
A specific return on investment is not considered good, as the appropriate level of return will vary depending on the circumstances of the investor'srisk tolerance和目标。
However, a few factors can facilitate helping the investor in determining what a good ROI is:
1.风险水平
Risk and return are correlated, meaning investors who invest in riskier projects will expect a higher return as a payoff for taking on some additional risk. Resulting in a trade-off that states that the potential return increases with an increase in risk.
例如，固定收益投资被认为比股票的风险较小。结果，股票回报通常更高than on bonds.
2.投资者的目标
Determining their goals and time horizon is essential since the return will depend on them. For instance, an investor who is risk tolerant might be willing to accept a higher risk in exchange for a higher level of risk.
On the contrary, an investor saving for retirement might accept a lower return for a lower level of risk.
3. Historical Return
幸运的是，有大量数据可用于检查各种资产类别'历史回报, which can be crucial for evaluating the potential return on investment.
Historical data suggests stocks are more volatile than bonds. However, stocks have higher returns.
The main idea is to think there is a trade-off between risk and return. The higher the risk, the higher the return, and investors will demand to take on the extra risk.
使用ROI指标的实用提示
将投资的投资回报率（ROI）与各种投资的其他可比回报进行比较可以帮助我们做出更好的决定。
这可以帮助我们确定业务或投资的表现比行业中的类似业务更好还是更糟。
有一些有用的方法可以将企业投资回报率与竞争对手进行比较：
1. Compare industry averages
Comparing the ROI of an investment to industry averages can give you perspective on how your investment is doing compared to its peers. This strategy is particularly helpful when evaluating an investment in a specific industry.
2. Compare to a基准指数.
Comparing the investment to a benchmark index is extremely useful; a great example is the S&P 500 for stocks to see how the investment compares to the overall market.
3.与投资者的投资组合相比
Usually, suppose the investor owns a diversified portfolio. In that case, they can compare the return on investment of the specific project to the overall rerun of their portfolio to evaluate the investment's performance.
Comparing the ROI of an investment across its competitors is only a factor to consider. Again, understanding factors such as the trade-off between risk and return, investors' goals and horizons, and other factors should always be considered.
- Keep in mind a positive ROI will indicate an economically efficient investment. Still, it's not necessarily the better one.
- 回报的概念与项目的风险概况直接相关。
- The concept of a return on investment is linked to risk; the riskier a project is, the more return you expect to receive as a payoff for the extra risk.
- 采取高风险和小额投资回报率，甚至积极的项目可能是该公司的一个极糟糕的决定。由于该公司没有适当地偿还其出于风险的风险。
Researched and Authored by Mohammad Ezzeddine
Reviewed & Edited by Ankit Sinha|LinkedIn
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