Long time!! I hope you all are having fun with this! 

Numbers are fun! We learn so much about our business when we understand numbers!!! When I review financial and productivity  reports with our physicians, I tell them all of the time....Numbers tell a story!! Aren't they fun!!!  :) (sounds a little corny, but its true!)

Today, let's review ROI (Return on Investment) and Cost Benefit Analysis. These two items are used all of the time in a business. 

Return on investment (ROI), also referred to as rate of return (ROR), is the ratio of money earned or lost on a given investment relative to the amount of money invested. Determining the ROI is a very important part of any investment review. Whether you’re investing in capital upgrades or new business ventures, estimating a return on investment will help you choose among investment options. In order to calculate ROI, you must:

1) Calculate all costs associated with a given investment. This would include all up-front costs, maintenance costs, time costs, etc.

2) Estimate returns on the investment. How much will you gain from the investment (revenue) and when do you expect the gains.

3) Establish a timeline for costs and returns

4) Calculate annualized ROI.

(see attachment for an example of a ROI. There are two sheets in the workbook!)

Cost Benefit Analysis

Cost-benefit analysis (CBA), also called benefit-cost analysis, is a process for calculating and comparing benefits and associated costs of a given project or decision.  The reasons for performing a cost-benefit analysis are to: determine if the project/decision is a sound investment – meaning is it justifiable, feasible – and to provide a means for comparing projects to one another by comparing the cost of each option against the benefits of each to see whether benefits outweigh costs and by how much. Performing a CBA is more comprehensive than an ROI as it takes into account both hard and soft (tangible/intangible) costs and benefits including effects on people (stakeholders, non-stakeholders) and the environment.

 Questions????