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Understanding ROI (Return on Investment)

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Understanding ROI (Return on Investment)

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Questions and Answers

What is the primary purpose of ROI in business decisions?

To compare the efficiency of different investments (correct)

To estimate the cost of future projects

To determine the most effective sales strategy

To calculate the total profit of a business

What is a challenge of using ROI in business decisions?

It is time-consuming to evaluate the ROI

It is only applicable to small businesses

It is challenging to estimate future benefits and intangible gains (correct)

It is difficult to calculate the ROI

What is the formula to calculate ROI?

ROI = (Net Profit / Investment Cost) x 50%

ROI = (Net Profit / Investment Cost) x 100% (correct)

ROI = (Investment Cost / Net Profit) x 100%

ROI = (Net Profit + Investment Cost) x 100%

What is a benefit of using ROI in business decisions?

It helps to make budget-efficient decisions Signup and view all the answers

Why is ROI important in developing future marketing strategies?

It helps to identify the most profitable marketing strategies Signup and view all the answers

What is an example of a business decision where ROI can be used?

Purchasing a new tool or equipment Signup and view all the answers

What is the main reason ROI is used to compare the efficiencies of multiple assets?

To identify the most profitable investments Signup and view all the answers

What is an example of a business decision that utilizes ROI?

All of the above Signup and view all the answers

What is the benefit of using ROI in business decisions?

It allows for budget efficiency Signup and view all the answers

What is a limitation of using ROI in business decisions?

It has difficulty in estimating future benefits and intangible gains Signup and view all the answers

What is the result of a higher ROI ratio?

A higher benefit earned Signup and view all the answers

What is the purpose of ROI in analytics?

To develop future marketing strategies Signup and view all the answers