What does Return on Investment mean?
Return on investment is a metric which measures investment & profitability. The major thing concerned in investment is the profit gain from it.
It is a financial ratio to calculates the benefit of an investor over his high yield investments. Understanding of present value and future value help to control low risk investments. Future value calculator and Present value calculator helps to calculate without errors.
What is ROI?
ROI stands for "Return on Investment". ROI measures the amount of return at a particular investment related to the investment costs. Calculation of ROI is simple and precise.
Return on investment is found by dividing the benefit of an investment by the cost of investment. The resulting figure is in the form of a percentage or ratio.
Return on investment is altogether different from return on assets. For calculating internal rate of return, try return on assets calculator for free.
Return on Investment formula
ROI is measured over net income divided by the original capital cost of investment. If the ROI ratio is greater, the greater benefit will be earned. The ROI formula is as follows:
Return on Investment formula allow us to compare different investment rates. Return on investment calculator uses same ROI formula to simplify the calculation.
Find out the difference between Margin & Markup.
ROI for Rate of Return
ROI is a broad term that can be applied to any level of assessment such as ROI on a stock investment. Return on investment is applied when a company spread the business.
It is better to consider further opportunities with higher ROI is available. Likewise, while selecting the options you should avoid negative ROI. It will impose a net loss.
The ROI helps to understand the average stock market return of invested capital. It makes the safe investments with high returns look more proper and safe.
What is ROI in business?
In business, the return on investment helps to check the rate of return of invested money. Anyhow, if you have found ROI value low you can switch to another investment option.
Large enterprises calculate ROI so that the company avoids any mega loss. They select investment option that provides the largest ROI value. It also helps a company to check total return to avoid business loss on low risk investments.
Also learn how much tax you need to pay on the sales of certain goods and services.
Suppose Williams invested US $1,000 in plastic trade corp in 2017 and sold his shares on stock for US $1,200 one year later.
To calculate ROI, he would divide his profits from investment cost ($1,200- $1,000 = $200). His return on investment is US $200 over US $1,000 which is 20 percent.
With this, he can compare his investment in plastic trade with his other projects. Suppose William has also invested US $2,000 in chocolate candy stores Inc. in 2015 and sold his shares for a total of US $2, 800 in 2018.
The ROI on William’s holdings in a chocolate candy store would be US $800/$2000 or forty percent. You can also calculate return on investment with a rate of return calculator.
Use Ebitda calculator to measure the income before applying Interest, Taxes, Depreciation and Amortization.
How to calculate Return on Investment?
Suppose if you have purchased a property that is valued at US $500,000. Two years later, you have sold the property for US $1,000,000.
The rate of return formula is:
As per the basic return on investment formula, ROI value in this case will be:
Impact of ROI on mutual funds
ROI impacts top performing mutual funds or best performing mutual funds quite significantly. It makes it possible for a person to create best investment plan with high returns. It also help someone to look for best mutual funds to invest in for long term.
Our web portal will help you learn more about cash on cash return, mutual fund returns or total return funds.
For your mortgage plans, use our online Mortgage Calculator.
How to use Return on Investment Calculator?
Return on investment calculator is very easy to use. For ROI calculation, follow below steps:
Step #1: Fill in the invested amount.
Step #2: Feed the amount returned.
Step #3: Select the investment length.
Step #4: Click on calculate button.
Once you clicked on the button, return on investment calculator will instantly calculate the results for you. You'll be able to see Investment gain, Return on investment & Annulized ROI.
We tried our best for you to learn return on investment properly. Our online ROI calculator is also for your learning & practice.
The content is wrote by top financial experts and analysts so that there is no chance of any wrong information. Please provide your valuable feedback so that we could improve further.