What is ROI?
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What is ROI?

ROI or return on investment is a method that a business may implement to calculate how much profit that investment stands to give them in comparison to the purchase price.

The gain the investment made minus the costs then divided by the cost equals a percent of profit that the spender has made. From a business perspective, these percentages can be compared with other investments and decisions can be made as to which investments are most profitable. In finance, knowing these figures is key to having companies succeed. Here, a few select businesses will be looked at, and their approach to reaching the best ROI they can.



Oil Companies

It can take time for these types of companies to grow their finances in order to see profit. Oil companies will look at the costs of development, different types of product, and the current margins of where the oil is at in the market. They require a good structure base for their business and exceptional management in order for a positive return. A company trying to locate a drilling site would have to weigh the costs first before initiating a project. When that is addressed, they may also consider new technology in the area of drilling itself and determine if those changes will provide good results as well.
The oil company would also look into how much funding they can recieve. All of this is what would come into play when deciding a proper ROI.

Ski Resorts

A ski resorts' return on investment can result in a few different factors. The location itself can determine its appeal and how much can be charged for going there. How many current and returning members of the resort can play a key role. Usually they will have a limited time frame in which to come up with profit, so creative ideas much be made to figure out how to increase their ROI each year. This in combination with the cost of regular maintenance.

The weather itself may also needed to be taken into account each year, whether it was a good or bad season. For this business, the plans would vary from year to year, so keeping a ?buffer? of funds would be needed to ensure a balanced budget.



Restaurants

The ROI on a restaurant depends on the combining overhead costs, which can vary, depending on the type of restaurant it is. Costs of food may increase or decrease as well based on the economy. Numbers of customers that are received would be reviewed, overall popularity considered. What product the restaurant is offering and whether it needs to be improved or not. General maintenance would also have to be applied.

The comfort of the restaurant could decide whether people go there which could also affect the return on investment. These are just a few of the things that a restaurant would look at when reviewing their ROI.

Resorts

Amenities offered on a resort are usually the first thing people look at when selecting a resort. What would be the cost of such extras? There may be entertainment, which would require a budget for that specifically. This would ultimately decide on the amount of people who may decide to go during the on season.



Affordability of discounts during the off season would also play a role on the ROI for resort companies. Location, and how well known the resort is would also affect its bottom line. How many people came for the entire year and the figure that was produced as a result. In the resort business, the return on investment would rely on all these factors.

Although there is a formula for coming up with an ROI, real life dictates that there may be hiccups in the way of finance with any business. However if the companies are aware of their strengths and weaknesses, they can rise above even the most difficult times.

It is important to note that every business has its own unique challenges and so being familiar with them in any business is essential. Keeping up with trends and understanding the logistics of each, paramount. Understanding the formula of a return on investment is important, but one must also know the business itself and its own needs.
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