what is ROI and could you plz explain me in detail with all
calculations with proper example, that how u will calculate
ROI of a FMCG distributor.Remember that you have to explain
me in that manner that i am a fresher and u r explaining me
all the things abt ROI in proper steps that a person may
know each and everything abt ROI after ur example so
Answers were Sorted based on User's Feedback
Answer / manish
return investment=net profit/investments*100
|Is This Answer Correct ?||109 Yes||15 No|
Answer / ajay kushwaha
a. RoI or Return on Investment = Returns/ Net Investment
b. Returns = Earnings â€“ Expenses
c. Earnings = Gross Margin that the dealer enjoys
(Usually 6% - 8% in FMCG companies)
d. Expenses = Direct Expenses + Indirect Expenses
|Is This Answer Correct ?||59 Yes||7 No|
Answer / chetan
Return on investment (ROI) measures the gain or loss generated on an investment relative to the amount of money invested. ROI is usually expressed as a percentage and is typically used for personal financial decisions, to compare a company's profitability or to compare the efficiency of different investments.
The return on investment formula is:
ROI = (Net Profit / Cost of Investment) x 100
How it works/Example:
The ROI calculation is flexible and can be manipulated for different uses. A company may use the calculation to compare the ROI on different potential investments, while an investor could use it to calculate a return on a stock.
For example, an investor buys $1,000 worth of stocks and sells the shares two years later for $1,200. The net profit from the investment would be $200 and the ROI would be calculated as follows:
ROI = (200 / 1,000) x 100 = 20%
The ROI in the example above would be 20%. The calculation can be altered by deducting taxes and fees to get a more accurate picture of the total ROI.
The same calculation can be used to calculate an investment made by a company. However, the calculation is more complex because there are more inputs. For example, to figure out the net profit of an investment, a company would need to track exactly how much cash went into the project and the time spent by employees working on it.
Why it Matters:
ROI is one of the most used profitability ratios because of its flexibility. That being said, one of the downsides of the ROI calculation is that it can be manipulated, so results may vary between users. When using ROI to compare investments, it's important to use the same inputs to get an accurate comparison.
Also, it's important to note that the basic ROI calculation does not take time into consideration. Obviously, it's more desirable to get a +15% reuturn over one year than it is over two years.
|Is This Answer Correct ?||10 Yes||3 No|
Answer / ganesh sahu
|Is This Answer Correct ?||6 Yes||10 No|
Answer / balkee
total turnover * margin=gross profit- expenses= netprofit ROI=gross profit - net profit /investment*100
|Is This Answer Correct ?||10 Yes||15 No|
Answer / pardeep madhwal
ROI means Return on investment
ROI = Profit/Investment*100
Distributor M/s Virgo agency in dwarka having turnover 70 lac per month distributor margin 8%, Salesman 10000 rs, Accountant 10000 rs, Driver 10000rs, Helper 5000
Fuel 5000,Electricity 5000, Market credit 50000,Average closking stock 6.5 lac.
Ans. Income 70 lac* 5% = 350000
Expense Salesman salary= 10000
Investment= 6.5 Lac+ 50000rs = 7Lac
ROI= 315000/700000*100 = 45%
Simple example want more contact me
Healthier ROI is around 22%
|Is This Answer Correct ?||57 Yes||62 No|
Answer / saravana
Roi Estimation - Presentation Transcript
Anand Paropkari Estimating ROI For Process Improvements
ROI & its significance
Elements of ROI
Time – the missing dimension
What is ROI? “ Return on Investment (ROI) is a measure of
investment potential by comparing the expected benefits to
the total investment.”
Significance of ROI Money is the language of business and
quality efforts must be communicated to management in their
language. - Juran
Benefits of ROI
Determine potential of the improvement
Justify value to the management
Track and monitor improvements
Elements of ROI
Elements of ROI ROI = (Total benefits – Total Cost) / Total
Cost Benefits : Estimated benefits measured in dollars
Cost : Estimated cost measured in dollars
Key Factors Affecting Cost
Software tools and technology
Support and maintenance of infrastructure
Standard or model (e.g. ISO, 9000, ITIL etc.)
Off the shelf methodolgy / roadmap
Process definition & documentation
Time & Efforts
Hiring people with specialised skills
Rewards and recognition
Estimating Benefits Intangible benefits may not be
traceable to software engineering processes alone. Benefits
Tangible benefits Intangible benefits
Reduced cost of operation
Increased customer satisfaction
Increased employee motivation
Increased market share
Growth in revenue
ROI Example ROI = (235,000-210,000)/210,000 = 11.90% Net
benefit = $25,000 235,000 Total 210,000 Total 100,000 Work
Effort 95,000 Improved cycle time 25,000 Training 35,000
Vendor 140,000 Reduced defect and rework 50,000
Infrastructure Amount in $ Category Amount in $ Category
Challenges of Estimation
Inadequate past data
Scope of process improvement
Impact to the organization
Size and duration of the effort
Organization's inertia to change
Validity of assumptions
Effect of project risks on estimation
Good understanding of the organization is required to
overcome these challenges
Use industry benchmarks with caution
Most Benchmarks are organization specific
Cycle time : Depends on how process is designed and
supported by automation
Rework : Depends on way of execution, but percent value may
be used as benchmark
Productivity : FP or KLOC value may be used as benchmark
TIME.. The Missing Dimension
Time Value of Money
In 1624 the Native Americans sold Manhattan island for $24
If they had invested $24 at 6% annual interest they would
have had $70 billion in year 1999
$1 received 1999 years ago, invested at 6% could now be
used to purchase all the wealth in the world
Example taken from the book Foundations of Financial
Management by Block and Hirt.
Fundamentals of Finance
Let's understand some basic financial concepts:
Time Value of Money
Present Value (PV)
Future Value (FV)
Net Present Value (NPV)
Future & Present Value At 10% interest per annum, Value of
$1000 after 5 years will be $1611, OR $1000 is present
value of $1611 earned in 5th year from now.
Future & Present Value
FV = PV(1 + i) n
PV = FV/(1 + i) n
FV : Future value
PV : Present value
i : Rate of interest per annum
n : Number of periods
Functions to calculate FV and PV are available in MS Excel.
Net Present Value (NPV)
The difference between the present value of the benefits
and the present value of the expenditures is Net Present
NPV is essentially a profit and loss statement
A positive NPV means that the improvement generates more
benefits than it took to fund it and vice versa.
ROI alone doesn't give complete picture, flavor of NPV
makes it perfect
ROI Example Net benefit = $20,163
Opportunity cost is the potential loss incurred by not
utilizing an opportunity to get benefit.
It's the cost of 'status quo'
If avg. budget overrun of projects is 35%, as compared to
industry avg. of 5-10%, then the opportunity cost is 25-30%
of project budget.
ROI is a measure management can understand
Cost and benefits are basic elements of ROI
Accuracy of estimation depends on understanding of the
NPV along with ROI gives complete picture of benefits
|Is This Answer Correct ?||23 Yes||44 No|
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