Post the discussion on factors of production, we realize that sufficient funds is one the critical aspects to arrange all the necessary resources. If we look at how these funds could be acquired for the business we find the following:
- I use the money I already have, and enhance the "investment" by creating a steady stream of profit from the operations of the company.
- I borrow the amount I require from friends/acquaintance and get that invested into business and then share the profit I earn with my friends
- I borrow a certain amount from the bank and then invest that into business and give a interest to the bank and keep the remaining profit to myself
- I borrow from a lot of people, give them a promise of sharing the profit, invest that entire amount into business and then when the profit is earned share it with the people who have my promise note.
What we necessarily understand is that business's interesting aspect is that it should act like magnifying glasses for any amount (investment) that is put into the business and would necessary create an increase in the investment for that particular venture - be it a business or its product.
To measure each of these investments and probably be able to compare them across the investment options - be it put it on a new product, or on marketing an existing product, or on research and development, etc. This way of measuring is generically called Return on Investment.
We shall look at each of the ways of working out the return on investment and the ways to work out this with regard to investment decisions
Read in Kannada:http://somanagement.blogspot.com/2011/02/blog-post_23.html