The Inside Investor. investment Strategies, (ROI) Return on Investment.

Return on Investment (ROI) analysis is one of several commonly used approaches for evaluating the financial consequences of business investments, decisions, or actions. ROI analysis compares the magnitude and timing of investment gains directly with the magnitude and timing of investment costs. A high ROI means that investment gains compare favorably to investment costs.

ROI

With the current global economic conditions beginning to alleviate and stabilise, the second half of 2010 is set to generate some tremendous prospects for the informed investor. As major and minor markets regain a sense of balance it will undoubtedly result in some very attractive, undervalued companies.

These may have experienced a challenging time in the global slowdown, yet they still may represent a solid business model, in markets of potential growth for the imminent bull market.

It is these market corrections and stagnation which can present opportunistic investors with some insightful prospects. With many stocks heavily reduced in price, but more importantly NOT in value. They may still represent solid value in terms of their business plan, the sector they operate in and many other vital factors. It is these stocks that The Inside Investor aims to bring into the spotlight for our subscribers.

The ROI Concept

Most forms of ROI analysis compare investment returns and costs by constructing a ratio, or percentage. In most ROI methods, an ROI ratio greater than 0.00 (or a percentage greater than 0%) means the investment returns more than its cost. When potential investments compete for funds, and when other factors between the choices are truly equal, the investment—or action, or business case scenario—with the higher ROI is considered the better choice, or the better business decision.

Simple ROI is the most frequently used form of ROI and the most easily understood. With simple ROI, incremental gains from the investment are divided by investment costs.

Simple ROI works well when both the gains and the costs of an investment are easily known and where they clearly result from the action.

ROI Analysis

Identify the things that the organization values. With commercial companies this is easy – improve profitability. Governments are more difficult. With governments return on investment is more appropriately aligned with an improvement of the quality of service delivery. What adds value to the service or product? Value mapping is a method of making sure we have the right variables in the ROI equations. When the project is complete, what is the value stream…what is being done differently that people are willing to “pay” for. Understanding the in government settings payments are indirect but thinking about payment for the service if people did have to pay, ask the question “Would they if we did things this way?”

Here at Investor Strategies we don’t look to bombard our readers with a large number of prospects and recommendations, but to only bring a handful of the very best.