ROI stands for Return on Investment, which is a performance measure. Usually, it is used when an investment opportunity is in question. Businesses use this measure to evaluate the efficiency of an investment. It calculates the amount of return on an investment, which means the profit, generated due to a certain amount invested. Businesses also use ROI to make a comparison between different investment scenarios, in order to decide which is the most profitable one. It is calculated by dividing the profit of an investment by the cost of the investment and expressed as a percentage. Profit means revenue minus costs. The formula of Return on Investment is as follows:
ROI= (Gain from Investment - Cost of Investment) / Cost of Investment x 100
Multiplying the result by 100 makes it a percentage.
Assume that the gain is $210, and the cost is $140. Then ROI is:
ROI= (210-140) / 140 = 0.50 x 100= 50%
ROI is an acronym which stands for Return on Investment. Return on Investment is a business term which calculates whether an investment made by a business has returned a loss or a gain—that is, whether or not it has been a profitable and sound investment. There is a simple calculation to find ROI, provided that you know how much profit has resulted from the investment, and the cost of the investment itself.
For example, let's say you invest $20 in purchasing materials from which you knit four sweaters. You then sell each sweater for $8. Your total investment is $20, and your total profit is the sales value minus the original investment. In this case, you have made $32, so your profit is $12. So, to calculate your ROI, you use the following calculation:
(Net Profit/Cost of Investment) * 100 = ROI
12/20 * 100 = 60%
Therefore, your ROI for this investment is 60%.
https://investinganswers.com/dictionary/r/return-investment-roi
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