1. What is ROI?

ROI (Return on Investment) is a financial metric used to evaluate the efficiency or profitability of an investment. It measures the return relative to the cost of the investment.

2. How Does the Calculator Work?

The calculator uses the ROI formula:

Where:

• \( Gain \) — Total return from investment (USD)
• \( Cost \) — Total cost of investment (USD)
• \( ROI \) — Return on Investment (%)

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

3. Importance of ROI Calculation

Details: ROI is crucial for investment decision-making, comparing different investment opportunities, and assessing 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 USD. Both values must be positive numbers, and cost must be greater than zero for accurate 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?
A: Yes, ROI doesn't account for the time value of money or the duration of the investment, which can be important factors.

Q5: How is ROI used in business decisions?
A: Businesses use ROI to evaluate projects, compare investment opportunities, and allocate resources to the most profitable ventures.