Question

Explain the Return On Investment (ROI)

Answer 1

ROI : This ratio measures the relationship between profit before interest, tax and dividend and capital invested or Capital employed. It is expressed in percentage. The following formula is used to find the ROI.

∴ ROI = `"Profit Before interest , tax and dividend"/"Capital Employed" xx 100`

Here, capital employed refers to equity share capital, preference share capital, reserves and surplus, debenture capital and long term loans. Thus, it is the total amount employed/invested in the business.