ROI is Return On Investment

Return On Investment is calculated by putting current value of the investment over initial value of the investment

Initial Investment Value:?The estimated value of the investment when it was first acquired

Current Investment Value:?The estimated value of your investment at this moment

What is a Return on Investment (ROI)?

Return on Investment (ROI) is a financial metric used to measure the profitability of an investment, relative to its cost. It is a ratio that expresses the amount of return earned on an investment, as a percentage of the investment's cost.

How is Return on Investment (ROI) Calculated?

Return on Investment (ROI) is a financial metric used to evaluate the profitability or efficiency of an investment. It measures the return, or gain, relative to the cost of the investment. ROI is typically expressed as a percentage and can be calculated using the following formula:

ROI = (Net Profit / Cost of Investment) * 100

Where:

Net Profit: This is the total gain or return generated from the investment. It is calculated by subtracting the initial cost of the investment from the final value of the investment, including any additional income or cash flows generated by the investment during the holding period. The net profit can also be negative if the investment results in a loss.

Cost of Investment: This is the total cost or outlay required to acquire and maintain the investment. It includes the initial purchase price as well as any additional expenses such as transaction costs, maintenance costs, or renovation costs.

Once you have calculated the ROI using this formula, you express it as a percentage by multiplying the result by 100. This percentage represents the return on investment as a ratio of profit to the initial cost, making it easier to compare investments of different sizes and types.

It's important to note that ROI is a straightforward metric for evaluating the financial performance of an investment but does not take into account other important factors like the time horizon of the investment, the risk associated with it, or the opportunity cost of investing in other alternatives. Therefore, it should be used in conjunction with other financial analysis tools and considered in the context of your specific investment goals and objectives.