HomeHome SearchSearch MenuMenu Our productsOur products

Financial analysis tools: Here's what you need to know about a return on investment analysis

by , 03 September 2014
You must analyse your company's financial statements regularly so you'll be able to see problems that exist or may soon exist.

Now there are three financial analysis tools you can use to do this. They are:

1. Profitability analysis;
2. Return on investment analysis; and
3. Risk analysis.

For the purposes of this article, we'll focus on the return on investment analysis because it's a crucial yet often misunderstood tool.

Here's what you need to know about a return on investment analysis so you can analyse your financial statements effectively.


*********** Hot off the press ************
 
Are you spending TOO MUCH on accounting costs?

REVEALED: The secret to reducing your audit fees…

The truth is you could pay less accounting fees while at the same time prevent fraud, save on tax and Vat costs and keep up to date on changing legislation.

Click here for the cost-effective alternative to audit fees

******************************************

 

Financial analysis tools 101: Return on investment analysis explained 


Return on investment analysis focuses on the profitability of your investment over a given time frame.

This analysis is important because it allows you, the investor, to review how an investment is performing. If an investment is performing well, you may decide to invest more resources in it and if it isn't doing well, you may decide to take money out or find out the reasons why it's performing badly.

If you're still not convinced about the importance of a return on investment analysis, imagine this…
 

Imagine for a moment that you have two investments. One investment has achieved a healthy return, the other has made a substantial loss on the original investment.

Without performing return on investment analysis, you might not know which one is performing and which isn't. You wouldn't be able to investigate the poor performer or reward the good performer with additional investment.

As you can see, return on investment analysis is crucial.

We've just scratched the surface regarding this topic, to find out more information (e.g. the five analytical tools you can use to measure return on investment), check out the Practical Accountancy Loose Leaf Service.
 
Now that you know about the return on investment analysis, analyse your company's financial statements effectively.
 


Related articles




Related articles



Related Products



Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance



Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today



Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism



This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands



Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>