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 investment's cost.

2. How Does the Calculator Work?

The calculator uses the ROI formula:

Where:

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

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 evaluating the performance of existing investments.

4. Using the Calculator

Tips: Enter gain and cost in any currency unit. Both values must be positive numbers, with cost greater than zero for valid calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROI percentage?
A: A good ROI varies by industry and risk, but generally 7-10% annually 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 investment duration, so it should be used alongside other metrics.

Q5: How is ROI used in business decisions?
A: Businesses use ROI to prioritize projects, allocate resources, and evaluate the success of marketing campaigns and capital expenditures.