ROI stands for Return on Investment. It is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.

How is ROI calculated?

To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.

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Calculate the efficiency of an investment or compare the efficiencies of several different investments.

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Amount Invested (Cost)

Amount Returned (Final Value)

Understanding Return on Investment (ROI)

Return on Investment (ROI) is a popular profitability metric used to evaluate how well an investment has performed. It is expressed as a percentage and represents the gain or loss on an investment relative to its cost.

The ROI Formula

        ROI = [(Current Value - Cost of Investment) / Cost of Investment] × 100
    

Why ROI Matters

Simplicity: ROI is easy to calculate and understand, making it a universal standard for comparing different investment opportunities.
Versatility: It can be used for anything from stocks and real estate to marketing campaigns and business equipment.

Note: While ROI is a powerful tool, it does not account for the "Time Value of Money." An investment that returns 50% over 10 years is very different from one that returns 50% in 1 year.