In the real world, can ROI analysis be used to analyze any investment decision?

Rois and Small Businesses Read more from
Chapter Small Business Investing

No. In the real world of business, many activities cannot be modeled using ROI analysis. There is also nearly no practical way to control the many variables that influence a company’s ultimate earnings, so it is not practical to use ROI analysis to see whether you should, for example, subsidize employee health club memberships, if doing so does not directly or greatly affect your company’s earnings. It may be a great idea, and may be just what the company needs to do to retain or attract employees, but it would be difficult to analyze the return on this type of investment.


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