1. What is Return on Investment (ROI)?

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

2. How Does the Calculator Work?

The calculator uses the ROI formula:

Where:

• \( Gain \) — The amount of money earned from the investment
• \( Cost \) — The initial amount invested

Explanation: ROI is expressed as a percentage or decimal value representing the return relative to the investment's cost.

3. Importance of ROI Calculation

Details: ROI helps investors compare the efficiency of different investments and make informed financial decisions. It's widely used in business to evaluate projects, marketing campaigns, and capital expenditures.

4. Using the Calculator

Tips: Enter the total gain (return) and cost (investment) in USD. Both values must be positive numbers, and cost must be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROI?
A: A "good" ROI depends on the investment type and risk. Generally, higher ROI is better, but must be considered relative to risk and time horizon.

Q2: Can ROI be negative?
A: Yes, negative ROI means the investment lost money (gain was less than cost).

Q3: What's the difference between ROI and ROR?
A: ROI measures return relative to cost, while ROR (Rate of Return) typically refers to the percentage change in value over time.

Q4: Does ROI consider time?
A: Basic ROI doesn't account for time. For time-adjusted returns, consider Annualized ROI or IRR (Internal Rate of Return).

Q5: How is ROI used in business?
A: Businesses use ROI to evaluate projects, compare investment options, and measure performance of expenditures like marketing campaigns.