How to Calculate Return on Investment?
The profitability of an investment is gauged by return on investment (ROI). It is computed by taking the investment’s net profit and dividing it by the investment’s cost, and then taking the result and expressing it as a percentage.
The ROI calculation formula is as follows:
- ROI is equal to 100 times (Net Profit / Cost of Investment).
Your return on investment (ROI) would be 20%. For instance, if you buy $100 in a stock and it generates a net profit of $20 after a year.
ROI = (20 / 100) x 100 = 20%
Remember that ROI is only one method of evaluating an investment’s performance. It has limits but can be helpful for comparing various investments. For instance, it does not account for the time worth of money, nor does it take the investment’s risk into account.
Return on Investment (ROI)
Return on Investment (ROI) is a performance indicator that is used to assess an investment’s effectiveness or to compare the effectiveness of several distinct investments. It is a ratio that assesses an investment’s profit or loss in relation to the capital invested. The cost of an investment is subtracted from the benefit or return of an investment, and the result is divided by the cost of the investment. A percentage or ratio is used to represent the outcome. ROI can be used to evaluate an investment’s performance in absolute terms. It can also be used to compare the effectiveness of various investments.
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