This paper critically examines and compares the ROQ inventory model, which is based upon a criterion of maximizing return on investment in inventory, with the familiar EOQ inventory model, which results from the criterion of maximizing residual income from investment in inventory. The EOQ model generally encourages a larger investment in inventory than the investment suggested by the ROQ model. It is shown that this additional investment always earns at a rate that is never less than the opportunity cost of capital, and therefore, maximizes shareholder wealth. It is also demonstrated that the ROQ may lead to unrealistically high order frequencies.