1. What is ROI Calculation?

ROI (Return on Investment) is a performance measure used to evaluate the efficiency or profitability of an investment. It compares the gain from an investment relative to its cost.

2. How Does the Calculator Work?

The calculator uses the ROI formula:

Where:

• \( Gain \) — Total return from investment
• \( Cost \) — Total cost of investment
• \( ROI \) — Return on Investment expressed as percentage

Explanation: The formula calculates the percentage return on an investment by comparing the net profit (gain minus cost) to the original investment amount.

3. Importance of ROI Calculation

Details: ROI is crucial for investment decision-making, comparing different investment opportunities, and evaluating the performance of existing investments. It helps investors determine which investments are most profitable.

4. Using the Calculator

Tips: Enter the total gain and total cost in any currency. Both values must be positive numbers, and cost must be greater than zero for valid calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROI percentage?
A: A good ROI varies by industry and risk level, but generally, ROI above 10-15% is considered good for most investments.

Q2: Can ROI be negative?
A: Yes, if the gain is less than the cost, ROI will be negative, indicating a loss on the investment.

Q3: What's the difference between ROI and ROE?
A: ROI measures return on total investment, while ROE (Return on Equity) measures return on shareholders' equity specifically.

Q4: Are there limitations to ROI calculation?
A: Yes, ROI doesn't account for the time value of money or the duration of the investment. It's best used alongside other metrics like IRR and payback period.

Q5: How is ROI used in business decisions?
A: Businesses use ROI to prioritize projects, allocate resources, and evaluate the success of marketing campaigns, capital expenditures, and other investments.