ROI

Many Happy Returns

What is a return on investment (ROI)?

ROI stands for “return on investment.” It is a ratio used to measure the value of an investment—simply put, the benefit of putting your time, money, or resources into something.


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Formula

For example, let’s say you invest $1,000 in Google and then sell your shares for $1,500 two years later. To calculate your return on investment:

  • Return on Investment is typically expressed as a percentage, so your return on investment would be 50%.
  • A positive ROI is considered a good return.
  • A negative ROI means that the revenue wasn’t even great enough to cover the original cost.
  • Something to remember about return on investment is that it doesn’t take into account the time value of money (does not take time into consideration). It’s better to get a 20% return over one year than a 20% return over two years.

Uses for return on investment calculation

  • Marketing
  • Investments
  • Real Estate Investing
  • Social Good
  • Scientific Advances

References

  1. http://www.investopedia.com/terms/r/returnoninvestment.asp

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