Return on Investment (ROI)

Q1. How is Return on Investment (ROI) Calculated?

Ans: The following formula can be used to determine ROI: (Return on Investment – Investment Cost) / Investment Cost The outcome is given as a percentage.

Q2. Can Return on Investment (ROI) be Negative?

Ans: Yes, ROI can be negative if the investment’s return is negative relative to its cost. If the ROI is negative, the investment did not make a profit; it actually lost money.

Q3. Is Return on Investment (ROI) the same as Profit?

Ans: No, profit is the actual net gain from the investment, whereas ROI measures how profitable an investment is. The investment’s profit is determined by deducting all costs from its return.

Q4. Can ROI be higher than 100%?

Ans: Yes, ROI can be more than 100% if the investment’s return is greater than its cost. The ROI would be 200%, for instance, if you invest $100 and the investment results in a net profit of $200.

Q5. What is meant by Return on Investment?

Ans: Return on Investment (ROI) is a metric for measuring financial performance that assesses an investment’s effectiveness or compares the effectiveness of several distinct investments. It is employed to assess an investment’s profitability or to assess the profitability of various investments. It is computed by dividing the net profit of an investment by the investment’s cost, and it is typically expressed as a percentage. The investment has been more profitable the higher the ROI.

Q6. What is a Good Return on Investment?

Ans: A good return on investment is one that satisfies or exceeds the objectives and expectations of the investor. This means that the investment should produce a level of return that is acceptable given the level of risk involved and the investment horizon.