Q. Show the Merits of using return on investment?
Merits of using return on investment (ROI)
- Relative (percentage) measure so performance can be compared 'relatively' for divisions or business units which are different sizes.
- ROCE is a well understood measure for 'users' of financial accounting.
- Forces a manager to be efficient and effective with resources e.g. money or capital employed to buy assets, when attempting to improve profitability.