810-440 · Question #196
Which option describers Return on Investment (ROI)?
The correct answer is A. a percentage of dividing net return from a technology solution by the cost of that technology. Return on Investment (ROI) is a key financial metric calculated as a percentage that demonstrates the efficiency or profitability of an investment. It is determined by dividing the net financial gain from a solution by its total cost.
Question
Which option describers Return on Investment (ROI)?
Options
- Aa percentage of dividing net return from a technology solution by the cost of that technology
- Ba percentage of dividing total investment from a technology solution by the cost of that technology
- Ca percentage of dividing net return from a technology solution by the margin of that technology
- Da percentage of dividing present value from a technology solution by the cost of that technology
How the community answered
(23 responses)- A91% (21)
- B4% (1)
- D4% (1)
Why each option
Return on Investment (ROI) is a key financial metric calculated as a percentage that demonstrates the efficiency or profitability of an investment. It is determined by dividing the net financial gain from a solution by its total cost.
Return on Investment (ROI) is precisely calculated by taking the net profit or net return from an investment, dividing it by the cost of the investment, and then expressing it as a percentage. This formula quantifies the benefit of an investment relative to its cost.
Dividing total investment by its cost would effectively just be 100% plus any percentage of profit, which is not the standard definition of ROI.
Dividing net return by the margin of the technology is incorrect because margin is a ratio of profit to revenue, not the total cost of the investment.
Dividing present value by the cost of the technology is a component of Net Present Value (NPV) analysis, not the direct calculation for Return on Investment (ROI).
Concept tested: Return on Investment (ROI) definition
Source: https://www.investopedia.com/terms/r/roi.asp
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