Economy Alliances

The phrase performance or return on investment is related to one of the most important concepts in corporate finance.

Total assets employed in a business created the need for equivelente amount of funds that must be captured in financial markets. These funds must be paid at market rate.

Payment can only come from capital gains on the efficient use of assets. Relating these gains to the value of assets that generate them, we find the parameters of return on investment.

If these returns are equal to or greater than the cost of funds, then the business can be viable. However, if the return is lower, the business has no long-term future.

The value of the assets shown on the balance sheet and earnings are shown in the profit and loss account.

So, we relate the value of the profit and loss account with balance sheet value for profitability.

The concept of ROI is universal, but the measurement methods vary greatly. This lack of consistency causes confusion in the minds of many people, both the financial sector and other sectors.

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