Return on investment
Risk and return on investment are largely dependent on each other as each determines the extent of the other. Return on investment gives insight into the financial situation of a company, and is quantifiable. Return on investment refers to the total profit recorded by a company over a certain period of time, mostly a year, when expressed as a percentage of the investment pumped into the company (Basu, 2019). To determine the return on investment of a company, therefore, the total assets held by the company needs to be known. These assets are then looked at against the total profit turnover of the company to determine their effectiveness in generating revenue. A high return on investment is a pointer to the efficient exploitation of available resources by the company; hence is important in attracting future investors. Risk, on the other hand, relates directly to investment returns, as it refers to the likelihood that the returns at the end of a given financial period end up being less than the expected returns (Basu, 2019). The projected returns for a given investment is usually determined by the historical returns, that is, the returns recorded in previous financial periods, which may include various data including the return on investment for the company investments.
The levels of risk I am willing to face include economic risk and competitive risk. The stated risks are common in the business confines; hence no organization can be run without their existence at some point. Economic risk is the risk occasioned by the fluctuations in the economy of a country, as a result of factors such as inflation and exchange rates among others (Boitnott, 2019). Competitive risk, on the other hand, refers to the risk of losing ground in terms of market influence to competitors in the industry (Boitnott, 2019). Both of these risks, as stated earlier, are very much present in any market; hence for the institution of any company and its subsequent success, both have to prepared for adequately.
References
Basu, C. (2019, January 28). The Concept of Return on Investment and Risk. Retrieved July 15, 2020, from Zacks: https://finance.zacks.com/concepts-return-investment-risk-3049.html#:~:text=Return%20on%20investment%20is%20the,carry%20some%20degree%20of%20risk
Boitnott, J. (2019, April 8). 7 Business Risks Every Business Should Plan For. Retrieved July 15, 2020, from American Express: https://www.americanexpress.com/en-us/business/trends-and-insights/articles/7-business-risks-every-business-should-plan-for/