What aspect of inventory management does ROI specifically focus on?

Return on Investment (ROI) specifically focuses on the financial returns generated from investments made, including those in inventory management. In the context of inventory, ROI helps assess how effectively the resources (such as capital tied up in inventory) are being used to generate profits. It looks at the relationship between the cost of inventory and the gains realized from selling that inventory. Understanding ROI allows managers to evaluate whether the inventory levels and practices are financially beneficial and to make informed decisions about purchasing, stocking, and selling products. By maximizing ROI, businesses can improve their overall financial health and strategic positioning in the market.