Reference no: EM133092812

The formula for Return on Investment (ROI) is Net Profit (before tax) / Owner's Equity. 

This ratio may be compared not only with those in similar businesses, but also with alternative investments. 

When comparing to the bank rate of interest, why should ROI be higher for the business than the bank rate? 

1. To compensate for potential bad debt that the business may experience.
2. To compensate for the risks associated with starting and operating the business. 
3. To compensate for the premium that banks charge on interest in addition to the bank rate.
4. To compensate for differences in size between the business and banks.

With regards to developing a well-prepared and well-researched marketing plan, which statement is correct? 

1. It's impossible for steps outlined in the marketing plan to proceed as indicated because marketing plans are best done on a day-to-day basis, which uses the most recent data and market condtions.  
2. Plans that are outlined in the marketing plan should proceed as indicated as long as assumptions have been validated.
3. Plans outlined in the marketing plan will likely lead to attractive profits as long as due diligence was performed. 
4. Plans outlined in the marketing plan will likely not succeed exactly as indicated.