# Return On Investment (roi)

The return on investment (ROI), measures the overall effectiveness of management in generating profits with its available assets.

Return on investment = | Net income after taxes |

Total assets |

Jimco's return on investment in 1993 is

$1,800,000 | = 0.58, or 5.8% |

$32,000,000 |

industry average = 5.9%

## Return On Equity (roe)

The return on equity (ROE) measures the return earned on the owners' (both preferred and common stockholders') investment. Return on equity is calculated as follows:

Return on equity | Net income available to common |

Common equity |

This ratio for Jimco is:

$1,800,000 | = .175, or 17.5% |

$10,300,000 |

industry average = 13.08%