Thread by @Finology_Quest

What is ROI & why it is important?🔍

A detailed thread🧵⤵️

#stockmarketcrash #finance

What is ROI?

It is a measure of financial calculation used to evaluate efficiency of investment or expected rate of return. It can be used to compare the efficiency of a number of diff. investments as well. It is a means to calculate the amt of ROI as compared to its cost.

The formula is:
ROI = Income of business unit/Asset of business unit

This measure is simple to evaluate & can be used across diff. types of invstmnts. ROI can be calculated on stocks, any capital investment or on an asset. The result of ROI can be positive or negative.

Limitations of ROI

ROI has its own limitations. While ROI gives a perfect idea of how profitable an investment is, one should not completely rely on ROI for decision-making

When comparing the ROIs of different companies, one must ensure that similar accounting methods and policies are used in all the companies compared to put them on the same comparison scale.

ROI mostly focuses on short-term results & returns & often ignores long-term profitability. ROI takes into account the current period's revenue and cost and often tends to overlook those investments and expenses, which will increase the long-term profitability of the business.

However, these limitations can be easily overcome by adding up other methods while making an investment decision so that the investor can make a better decision.

Therefore, learning more ratios & financial concepts is necessary to perform gud research & this is where Quest’s value investing comes to rescue - bit.ly/quest-value-in…

Hit retweet to reach maximum investors

Also, do let us know which ratio we should cover next.