Simple As 1, 2, 3: How to Calculate Return On Investment (ROI) admin Wednesday, March 5, 2014 The Receipt, Your Money and You Definition: A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. The best way to understand what a ROI is, is to look at how it is calculated. To calculate the ROI, use the following formula: ROI = (Investment Gain – Cost of Investment) / Cost of Investment The final number is either captured as a percentage or ratio. Regardless, what the formula does is show the investor if the investment is worth undertaking. With all investments, you take risks. But, by calculating the ROI, you as the investor can get a glimpse into the profitability potential of that investment. At times, however, the circumstances surrounding that investment may cause additional fees or returns. So, although the formula above is the way to calculate your ROI, there is room for modification. To learn more about ROIs, visit www.Investopedia.com.
