Return on Investment Measures

Return on investment measures evaluate the total profits generated relative to the capital deployed by debt and equity investors.

Analytical Perspectives

• The Return Engine: Determining how efficiently management deploys capital across the enterprise regardless of its funding mix.
• Spread Analysis: Comparing returns against the firm’s cost of capital; if returns are lower than capital costs, the company destroys wealth.

• Asset Base Distortions: Recognizing that fully depreciated older assets can artificially inflate return metrics.