Return on Investment (ROI) Analysis

Correct Answer: The quality and reliability of the cost-benefit data collected

The quality and reliability of cost-benefit data is the most crucial factor in ROI analysis accuracy because: ROI calculations are fundamentally based on comparing costs against benefits. If the underlying data is inaccurate or unreliable, the entire analysis becomes flawed regardless of how well other aspects are managed. Why other options are less suitable: Stakeholder feedback documentation, while important for project management, is secondary to the actual financial data in ROI calculations. Strategic alignment and performance indicators are important but do not directly affect the mathematical accuracy of ROI calculations. Industry benchmarks and market analysis provide context but are supplementary tools rather than primary factors in determining the accuracy of a specific project's ROI calculation.

Correct Answer: (Net Benefits - Project Costs) / Project Costs x 100

ROI (Return on Investment) is a financial metric that measures the profitability of an investment relative to its cost. The correct formula is (Net Benefits - Project Costs) / Project Costs x 100. This formula works because: 1. It calculates the net gain by subtracting the project costs from net benefits 2. Divides that gain by the project costs to get the ratio of return 3. Multiplies by 100 to express the result as a percentage The other formulas are incorrect because: - Adding project costs to benefits or revenue would inflate the return - Using total or annual revenue instead of project costs as the denominator does not accurately reflect the investment return - Using gross benefits rather than net benefits fails to account for all expenses - Operating costs alone do not represent the full project investment

Correct Answer: To assess the financial benefits compared to investment costs

The primary purpose of ROI (Return on Investment) analysis during business case development is to assess financial benefits compared to investment costs. This is fundamental because: 1. It helps organizations make informed decisions about investing resources 2. It quantifies the expected financial returns against the required investment 3. It provides measurable metrics for evaluating project viability 4. It helps justify project funding and resource allocation The other options are incorrect because: Determining total project budget and resource allocation is a project planning activity, not the main focus of ROI analysis. Evaluating stakeholder satisfaction and organizational readiness is part of change management, not ROI analysis. Measuring alignment between strategic objectives and technical requirements is part of requirements analysis and strategic alignment, which is separate from ROI analysis.