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Calculate return on investment (ROI) as a percentage of net profit relative to total cost.
ROI Formula:
ROI = (Net Profit / Total Cost) × 100
Where: Net Profit = Final Value − Total Cost
Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment. It expresses the net profit as a percentage of the total cost.
A good ROI depends on the investment type. Stock market investments historically average around 7-10% annually. Real estate often targets 8-12%. Any ROI above 0% means you made money.
You can improve ROI by increasing revenue from the investment, reducing costs, or both. Operational efficiency, better marketing, and cost management are common strategies.
Basic ROI does not account for time. For time-adjusted returns, use annualized ROI or metrics like IRR (Internal Rate of Return) or CAGR (Compound Annual Growth Rate).
Yes. A negative ROI means your investment lost money. The final value was less than what you put in. Negative ROI is also called a loss.
Include all costs directly related to the investment: purchase price, transaction fees, maintenance, taxes, and any additional capital invested over time.