ROI Formula: Calculate the ROI using the following formula

Certainly! The Return on Investment (ROI) formula is used to calculate the return you receive on an investment relative to the cost of that investment. Here’s the ROI formula:

ROI = [(Net Gain from Investment) / (Investment Cost)] x 100

Net Gain from Investment: This is the total benefits or returns you receive from the investment minus the total costs associated with the investment.

Investment Cost: This includes all the costs associated with the investment, including initial purchase or implementation costs, ongoing maintenance, and any other related expenses.

The result is typically expressed as a percentage, which represents the ROI as a percentage of the investment cost.

Here’s an example to illustrate how to calculate ROI:

Suppose you invest $10,000 in a new technology system for your business. Over the course of a year, the technology system generates $15,000 in additional revenue and leads to cost savings of $2,000 due to increased efficiency. However, there are ongoing maintenance costs of $1,500.

Using the ROI formula:

ROI = [(($15,000 + $2,000) – $1,500) / $10,000] x 100

ROI = ($15,500 – $1,500) / $10,000 x 100

ROI = $14,000 / $10,000 x 100

ROI = 140%

In this example, the ROI for the technology investment is 140%, indicating that for every dollar invested, you’ve received a return of $1.40.