810-440 Question #196: Real Exam Question with Answer & Explanation

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.

Introduction to Business Architecture

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

Explanation

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.

Common mistakes.

B. Dividing total investment by its cost would effectively just be 100% plus any percentage of profit, which is not the standard definition of ROI.
C. 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.
D. 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

Reference. https://www.investopedia.com/terms/r/roi.asp

Topics

#Return on Investment (ROI)#Financial metrics#Business value

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