The efficiency (profitability) ratio of investments depends on the specific market, field of activity, calculation method and other factors, so it is not possible to name a specific value of a good ROI. But in general, ROI> 0% is evidence that investments are profitable, and ROI < 0% indicates that investments are unprofitable.
The average ROI for the S&P 500 is about 10% per year. It is clear that successful but smaller businesses should have a higher ROI, especially if they produce a unique product.
Each industry has its own average kenya email list figures for this indicator. Here are some rough figures from NYU Stern School of Business on business efficiency:
online stores – 38%;
medicine – 80%;
education – 13%;
furniture production –25%;
retail – 18%;
software development – 32%;
construction – 27%;
advertising – 20%;
Telecommunications – 8%.
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Criteria for assessing the obtained result of calculating the return on investment
The value of the indicator must meet certain parameters that are developed in the company or prescribed in industrial standards. General criteria for determining its compliance:
Comparability with previous periods – the ROI ratio should be comparable to the data of previous financial periods. A stable profitability or its increase from period to period is a good indicator.
Industry Benchmarking – The investment performance value can be compared to industry averages or similar companies. A good return is indicated by a value above or equal to the average.
Return on Investment Assessment
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Organizational Target Parameters – A company can calculate its own average return on investment that is consistent with its financial aspirations and strategy.
Risk level – the performance indicator should take into account the risks faced by the enterprise. If the profitability is less than predicted, the company will take measures to reduce the threats and increase the estimated target data.
It is important to understand that expectations and actual ROE indicators differ depending on the size of the organization, the industry it operates in, its strategy, and other factors. Therefore, pay attention to external market conditions and the company's internal standards to understand whether the efficiency indicator meets the set parameters. The standard value may vary depending on the industry, economic situation, and country. It is usually determined by the company in relation to financial goals and strategy.
We can say that for an enterprise, profitability is the return on investment, which brings profit to investors and entrepreneurs. As a rule, it does not rise above 20%, but sometimes, depending on industry nuances and other criteria, it can be higher.