Knowledge Base

How to Calculate Return on Investment (ROI)

Return on Investment, or ROI, is the ratio for determining profitability. This lets businesses determine how much profit they are receiving (or how much cost they are saving) for a given investment.

Functions vary depending on factors specific to the business, but the basic formula is:

ROI=(Gains-Costs)/Costs ×100

For a simple example, let’s say you decide to loan your brother $50. If he pays you back $55, then your return on investment would be calculated as follows:

ROI =  ($55 – $50)/$50 × 100  =.1 ×100   = 10%

The return on your investment to your brother was 10%  (and he’s a GREAT brother!)

 

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