The calculation of return on investment (ROI) is a simple calculation for measuring the benefit from allocating capital. It is a measure of input-output behavior.



(1) input (investment, costs )

(2) output (earnings)


return on investment =

= ((earnings) - (investment)) / (investment)



• Earnings minus costs indicates the profit.



• A positive ROI indicates economic return. The higher the ROI the better the investment. This may be expressed as a percentage.

• An ROI of 0 indicates a break-even situation.

• A negative ROI indicates a loss.



• This is most useful as a rule-of-thumb.

• The simple calculation may be less informative if the return is over a long period of time or if multiple investments are needed.


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