Return on Investment compares the net financial benefit of an investment with its cost, usually expressed as a percentage. It supports investment appraisal but should be considered alongside timescale, risk and non-financial benefits.
How to use this tool
Define cost and period
Define the investment cost and appraisal period.
Estimate benefits and costs
Estimate attributable benefits and ongoing costs.
Divide net benefit by cost
Divide net benefit by investment cost and state the convention used.
Compare alternatives and test sensitivity
Compare alternatives and test sensitivity to assumptions.
References & further reading
Cadle, J., Paul, D., Hunsley, J., Reed, A., Beckham, D. and Turner, P. (2021). Business Analysis Techniques: 123 Essential Tools for Success, 3rd ed. BCS. ISBN 9781780175690.