Alejandra Tijerina Posted On Linkedin: What Did She Say?

Okay, let’s take a look at Alejandra Tijerina’s LinkedIn post and dive into the world of Return on Investment (ROI).

She mentioned a formula, Net Profit / Cost of Investment * 100%, and pointed out that ROI doesn’t account for the time value of money.

This is a key point to remember! ROI is a simple and straightforward way to measure how much you’re getting back for your investment. But, it doesn’t tell the whole story. Let’s unpack this a bit further.

Think about it like this: Would you rather have $10,000 today or $10,000 in five years? Most of us would choose the $10,000 today, right? That’s because money has the potential to grow over time. This growth potential is called the time value of money.

ROI doesn’t consider this growth. It assumes money has the same value regardless of when you receive it. For short-term investments, this might not be a big deal. But, for long-term projects or investments, it becomes more significant.

To get a more complete picture of your investment’s performance, especially over time, you might want to look at metrics that do factor in the time value of money.

For example, Net Present Value (NPV) and Internal Rate of Return (IRR) are two popular methods that consider the time value of money. These calculations help you compare investments more effectively and understand the real value of your returns.

So, while ROI is a useful starting point, remember that it provides only a snapshot of your investment’s performance. For a more holistic view, consider incorporating metrics that account for the time value of money.