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ROI

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › ROI

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by AvatarJohn Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
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    Posts
  • February 10, 2018 at 9:01 pm #436278
    Avatarmyacca1990
    Participant
    • Topics: 153
    • Replies: 164
    • ☆☆☆

    “ROI does not take into account the cost of capital. It merely looks at
    profits relative to capital employed without taking into account the cost of the capital
    which has been invested. It is therefore not consistent with maximising returns to
    investors”
    So that means the ROI controllable profit figure is before interest and tax that,s why does not take account of the cost of capital?If that,s not the case how come the above statement true?

    February 11, 2018 at 9:57 am #436371
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54839
    • ☆☆☆☆☆

    Investors want the company to be earning more than the cost of money to the company.

    If it is costing 20% but the company is only earning a return of 15% then that is not good for the investors.

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  • The topic ‘ROI’ is closed to new replies.

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