For a company to maintain its financial health, it must incorporate a payback method, a net present value and an internal rate of return. It is a responsible way to provide those invested in the business with the means to understand the overall financial health of the business. Additionally, these tools and methods can provide the internal and external forces that influence the overall financial health of the company. Evaluation of a return on investment (ROI) The ROI evaluates and compares the different investments made and invested by the company (Aacker, 2001). Calculating ROI involves dividing the profit (return) of an investment by the cost of the investment. A percentage or ratio is the result of this calculation (Investopedia, 2014). Additionally, there are step-by-step calculations that senior managers will use to calculate a company's ROI according to these procedures as defined by (Berman and Knight, 2008). ROI means return on investment. The first step is to provide information about whether the project is worth continuing or ending. Using the recovery method, accomplishes this first step. Payback method is the time required to recoup the cost of an investment (Berman and Knight, 2008). This method provides senior managers with the knowledge necessary to undertake or not undertake a business. For example, if the business has longer payback periods, the investment is not desirable. Berman and Knight (2008) further noted a problem with this method: first, it does not measure profitability, and second, this method ignores the time value of money. For example, if the concept of “time value of money” is not considered, other possible business opportunities may go unnoticed. This is why the second step is imperative. It is...... middle of paper...... the health of a business. For example, gross profit and net profit ratios indicate how well the company manages its expenses (Berman and Knight, 2008). Return on equity (ROE) explains the extent to which the company uses its own assets/equity to generate returns (Berman and Knight, 2008). Additionally, ROI indicates whether the company generates enough profit for its shareholders (Berman and Knight, 2008). Again, a higher ratio or value is desirable. A higher value means the business is doing well and managing to generate profit, revenue and cash flow. Conclusion For a business to maintain its financial health, it must incorporate all of the above-mentioned tools and methods. Ultimately, it is imperative that those who invest understand that a company does not invest lightly. Additionally, there is ethical and moral influence to maintain financial health..