Question

Describe when a rank alternative is used in place of ROI?

Answer 1

Within the DuPont indicator pyramid, ROI is used to measure a company’s successwhile taking into account the entire capital investment. The value answers the following question: How effective was the capital investment over the course of the accounting period under consideration? In theory, however, ROI is suitable as a measurement parameter for any application case in which success is to be determined by the return on invested capital. Other examples of where it can be applied are:

• The evaluation of investments
• The comparison of investment projects
• The analysis of individual business divisions

Business administration offers various profitability indicators that enable a company to measure its success and that of its investments. Ranking among the most important indicators of this type is return on investment (ROI)