When it comes to making informed decisions in loans and investments, understanding key financial metrics is not just beneficial—it’s essential. Whether you’re offering financial services or guiding clients through investment opportunities, focusing on Return on Investment (ROI) and Cash Flow can provide a clearer picture of potential success or risk.
Return on Investment (ROI) is a widely used performance metric that helps evaluate the efficiency or profitability of an investment. It tells you how much return you’re getting for the money you’ve put in. The formula is simple:
ROI = (Net Profit / Investment Cost) × 100
For example, if an investor puts ₹1,00,000 into a property and earns ₹1,20,000 in return, their ROI would be 20%. A higher ROI means the investment is yielding more profit relative to its cost.
For loan providers and investment consultants, highlighting ROI helps attract clients looking for high-performing opportunities. It also builds trust by showing clear, data-driven results.
While ROI tells you how much you’re earning on your investment, Cash Flow tells you how fast and consistently that money is coming in. In simple terms, cash flow is the net amount of cash moving in and out of a business or investment.
Positive cash flow indicates that more money is coming in than going out, which is critical for maintaining daily operations, covering loan repayments, and funding future investments.
For example, an investment property might have an impressive ROI, but if the monthly rent isn’t enough to cover mortgage payments or maintenance costs, the cash flow is negative—and that’s a red flag.
To make smarter financial decisions, it’s crucial to analyze both ROI and cash flow together. Here’s how:
By using both metrics, investors and financial planners can balance short-term liquidity with long-term profitability.
When it comes to making informed decisions in loans and investments, understanding key financial metrics is not just beneficial—it’s essential. Whether you’re offering financial services or guiding clients through investment opportunities, focusing on Return on Investment (ROI) and Cash Flow can provide a clearer picture of potential success or risk.
Return on Investment (ROI) is a widely used performance metric that helps evaluate the efficiency or profitability of an investment. It tells you how much return you’re getting for the money you’ve put in. The formula is simple:
ROI = (Net Profit / Investment Cost) × 100
For example, if an investor puts ₹1,00,000 into a property and earns ₹1,20,000 in return, their ROI would be 20%. A higher ROI means the investment is yielding more profit relative to its cost.
For loan providers and investment consultants, highlighting ROI helps attract clients looking for high-performing opportunities. It also builds trust by showing clear, data-driven results.
While ROI tells you how much you’re earning on your investment, Cash Flow tells you how fast and consistently that money is coming in. In simple terms, cash flow is the net amount of cash moving in and out of a business or investment.
Positive cash flow indicates that more money is coming in than going out, which is critical for maintaining daily operations, covering loan repayments, and funding future investments.
For example, an investment property might have an impressive ROI, but if the monthly rent isn’t enough to cover mortgage payments or maintenance costs, the cash flow is negative—and that’s a red flag.
To make smarter financial decisions, it’s crucial to analyze both ROI and cash flow together. Here’s how:
By using both metrics, investors and financial planners can balance short-term liquidity with long-term profitability.
