01Step 1: Determine the Net Profit

  • The first step in calculating ROI is to determine the net profit generated from an investment.
  • Net Profit = Total Revenue - Total Expenses

02Step 2: Calculate the Investment Cost

  • Next, calculate the total cost of the investment, including both initial investment and any subsequent costs incurred.
  • Investment Cost = Initial Investment + Additional Costs

03Step 3: Divide Net Profit by Investment Cost

  • To calculate ROI, divide the net profit by the investment cost and multiply the result by 100 to express it as a percentage.
  • ROI = (Net Profit / Investment Cost) * 100

Conclusion

Calculating return on investment is essential for investors to assess the profitability and efficiency of their investments. By following the steps mentioned above, investors can accurately determine the ROI of their investments and make informed decisions regarding their portfolio.

MethodsDetails
Step 1Determine the net profit
Step 2Calculate the investment cost
Step 3Divide net profit by investment cost
ROI
return on investment
investment analysis