1. What Is Percent Return On Investment?

Return On Investment (ROI) is a financial metric used to evaluate the efficiency or profitability of an investment. It measures the return relative to the investment's cost and is expressed as a percentage.

2. How Does The Calculator Work?

The calculator uses the ROI formula:

Where:

• \( \text{Net Profit} \) — Total profit from the investment (currency)
• \( \text{Cost of Investment} \) — Total amount invested (currency)
• \( ROI \) — Return on investment expressed as percentage (%)

Explanation: This formula calculates what percentage of the original investment has been returned as profit.

3. Importance Of ROI Calculation

Details: ROI is crucial for comparing different investment opportunities, assessing performance, and making informed financial decisions. It helps investors determine which investments are generating the best returns.

4. Using The Calculator

Tips: Enter net profit and cost of investment in any currency. Both values must be positive numbers, with cost of investment greater than zero for valid calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is considered a good ROI percentage?
A: A good ROI varies by industry and risk level, but generally 7-10% annually is considered good for stock investments, while higher returns may indicate higher risk.

Q2: Can ROI be negative?
A: Yes, if the net profit is negative (loss), ROI will be negative, indicating the investment lost money.

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: Does ROI account for time?
A: Basic ROI doesn't consider time. For time-weighted returns, annualized ROI or other metrics like IRR should be used.

Q5: What are the limitations of ROI?
A: ROI doesn't account for risk, time value of money, or investment duration. It should be used alongside other financial metrics.