1. What is ROI?

Return on Investment (ROI) is a financial metric that measures the profitability of an investment relative to its cost. It's expressed as a percentage and helps evaluate the efficiency of different investments.

2. How Does the Calculator Work?

The calculator uses the ROI formula:

Where:

• \( \text{Net Profit} \) — Total revenue minus total expenses (USD)
• \( \text{Cost of Investment} \) — Total amount invested (USD)

Explanation: The formula calculates what percentage return you've earned on your investment.

3. Importance of ROI Calculation

Details: ROI helps compare different investment opportunities, assess business performance, and make informed financial decisions.

4. Using the Calculator

Tips: Enter net profit (revenue minus expenses) and cost of investment in USD. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROI percentage?
A: Generally, an ROI above 10% is considered good, but this varies by industry and investment type.

Q2: Can ROI be negative?
A: Yes, negative ROI means the investment resulted in a net loss.

Q3: What are the limitations of ROI?
A: ROI doesn't account for the time value of money or the duration of the investment.

Q4: How is ROI different from ROE?
A: ROI measures return on total investment, while ROE (Return on Equity) measures return only on shareholders' equity.

Q5: Should I use ROI for all investment decisions?
A: While useful, ROI should be considered alongside other metrics like payback period and risk assessment.