About Return on Investment Ratio Calculator (Formula)
The Return on Investment (ROI) Ratio Calculator is a tool used to evaluate the profitability of an investment by calculating the ROI ratio. It helps in assessing the financial performance and efficiency of investments. The formula to calculate the ROI ratio is as follows:
ROI Ratio = (Net Profit / Cost of Investment) * 100
In this formula, Net Profit represents the earnings or returns generated from the investment, and the Cost of Investment refers to the initial investment amount.
To calculate the ROI ratio, you divide the net profit by the cost of investment and then multiply the result by 100 to express it as a percentage. The resulting value represents the ROI ratio, indicating the percentage return on the investment relative to the initial cost.
For example, let’s say an investment resulted in a net profit of $5,000, and the initial cost of the investment was $20,000. To calculate the ROI ratio, you would use the formula:
ROI Ratio = ($5,000 / $20,000) * 100 = 0.25 * 100 = 25%
In this scenario, the ROI ratio would be 25%, indicating a 25% return on investment relative to the initial cost.
The Return on Investment Ratio Calculator is widely used by investors, financial analysts, and business owners to assess the performance of their investments. By calculating the ROI ratio, they can compare different investment opportunities, make informed decisions, and identify the most profitable ventures. Additionally, tracking the ROI ratio over time helps in evaluating investment strategies and optimizing investment portfolios for maximum returns.