Return On Investment (ROI) is an
accounting valuation method.
Because the numerator (Net Income) is an
unreliable corporate performance measurement, the outcome of the formula
for ROI must also be unreliable to determine success or corporate value.
However the ROI formula still keeps showing up in
many annual reports...
The degree to which ROI overstates the
economic value depends on at least 5 factors:
 The length of project life (the longer,
the bigger the overstatement)
 The capitalization policy (the smaller the
fraction of total investment capitalized in the books, the greater will be
the overstatement)
 The rate at which depreciation is
taken on the books (depreciation rates faster than straightline basis
will result in a higher ROI)
 The lag between investment outlays and
the recoupment of these outlays from cash inflows (the greater the time
lag, the greater the degree of overstatement)
 The growth rate of new investment
(faster growing companies will have lower Return On Investment )
Formula
Net Income / Book
Value of Assets = ROI
(Better) alternative:
Net Income+Interest
(1Tax Rate) / Book value of Assets = Return On Investment
Book: Steven M. Bragg  Business Ratios and Formulas : A Comprehensive
Guide 
Book: Ciaran Walsh  Key Management Ratios 
Compare:
EBIT 
EBITDA 
Economic Value Added 
Earnings Per Share 
Return on Equity 
Net Present Value 
Return On Net Assets 
Return on Invested Capital 
Relative Value of Growth
More valuation methodologies
