How to Evaluate a Business Investment
It is essential to evaluate the outcome of an investment. This will help you to know whether it is a good investment or not. One of the most acknowledged and an essential system for evaluating a business investment is to compute the ROI (return on investment).
Here are simple steps you can follow:
1. Include all expenses connected with the investment you have made. Include the cost of advertisement, marketing, and other expenses made.
2. Compute the total income you have made as a result of the investment using your sales report.
3. Subtract your expenses from the total sales that you have made and then divide that figure by the total expenses. This will give you the return on investment. Then, multiply that number by 100 to get the ROI percentage.
4. Analyze the ROI rate to determine whether you have made a beneficial and brilliant business investment decision. If you have a positive return on investment, it shows that the investment was profitable.
Make sure you evaluate your business investment by calculating the return on investment regularly. This method is effective because it will allow you to evaluate your business investment with ease. Also, you can keep on setting clear investment objectives to either meet or surpass past results.
Stephen Souky is a Certified Public Accountant (CPA). He is a Controller at MHC. He is a skilled communicator and an effective leader. He has a Bachelor of Science degree in Accounting from the State University of New York (SUNY Fredonia).