The Return on Investment for a small business like Real Estate Funding Solutions is the Earnings before income and taxes divided by the Total Assets employed in the small business by small business owners like Ryan and David. This is a key profitability measure and it gauges just how well the small business is doing at turning over the investment in the total Assets made by the owners of the business. This key profitability ratio is looked at very carefully by lenders and potential partners in the small business world and it is important to understand that it has different meanings in different business environments.
Simply put the return on investment is the return ( profit or loss ) you make on the total investment made by you in any situation. Thus if you buy a stock for $100 and sell it for $110, your return on investment is $10. Then from there you can get into how long you held the stock and what your return on investment was at an annual rate and so on. In the small business context, the return on investment annually is the money that the business generates after operating expenses, but before paying income taxes and interest for a given investment in total Assets.
As our analysis reveals, the return on investment for the owners and investors of Real Estate Funding Solutions is projected to be 33.8%, 54.1% and 26% for 2012, 2013 and 2014 respectively. These are healthy returns since these numbers imply that for every $1 invested in the business, the business is able to generate up to 33 cents worth of earnings before income taxes in the first year and up to 26 cents in year 3.
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