In simple terms ROI (return on investment) is a percentage of profit or loss you have made in a particular investment over a given period of time. It is very simple to calculate ROI (Return On Investment). I will show you the step by step process on how to calculate ROI (Return On Investment) with formula in this article below.
4 easy steps on how to calculate ROI (Return On Investment) with formula
Step 1: First note down your cost of investment. Cost of investment includes the price you have purchased the product/shares/property with the additional cost involved like taxes/fees/renovation (For Example Joel purchased a house for $100,000 and spent $20,000 on the renovation. So the total cost of investment by Joel will be $120,000)
Step 2: Second is to note down the present value of the investment or the sale price of the investment. You need to subtract all your expenses in order to get the right ROI. (For example, Joel house currently valued at $160,000)
Step 3: Minus the cost of investment to the present value of the investment or the sale price of the investment which will give you the profit.
Profit = Present value of the investment – Cost of investment
Profit made by Joel= $160,000 – $120,000
Profit made by Joel= $40,000
Now that you have got the profit made on the investment its easy to calculate the ROI (Return on Investment)
Step 4: Divide the profit on the investment made by the cost of investment
ROI = Profit / Cost of investment * 100
ROI made by joel = $40000 / $120,000 * 100
= 0.3333 *
= 33.33%
Conclusion
I have shown you in 4 simple steps on how to calculate ROI (Return On Investment) with formula. Now you can easily calculate ROI on your investment.
