An advantage of using return on investment (ROI) to evaluate performance is that it encourages the manager to reduce the investment in operating assets as well as increase net operating income.

Return On Investment

A measure of the profitability of an investment relative to its costs, commonly expressed as a percentage.

Operating Assets

Assets used by a company to generate revenue, typically including property, plant, and equipment, but excluding investments and inventories.

Net Operating Income

The profit generated from a company's everyday business operations, indicating how much revenue exceeds both operating costs and overhead.