Individuals can calculate the ROI to judge their own personal investments and compare one investment - whether it is a stock holding or a financial stake in a small company - against another in their own investment portfolios. Businesses also use ROI calculations when evaluating future or prior investments. ROI can be used to evaluate various investment decisions, comparing them to their initial cost. If the percentage is negative, the investment is generating a loss. In short, if the percentage is positive, the returns exceed the total cost. Meanwhile, if the calculation has a negative ROI percentage, that means the business - or the metric it is being measured against - owes more money than what is being earned. When ROI calculations have a positive return percentage, this means the business - or the ROI metric being measured - is profitable.
To calculate ROI with the most accuracy, total returns and total costs should be measured. ROI can be used to gauge different metrics, all of which help determine how profitable a business is. This image shows how ROI can be calculated. ROI is shown as a percentage instead of a ratio for ease of understanding. Each equation may measure a specific set of investments. There are numerous other ways to calculate ROI, so when discussing or comparing ROIs between departments or businesses, it is important to clarify which equation was used to determine the percentage. Multiplying that by 100 yields an ROI of 150%.Īlthough the first investment strategy produced fewer dollars, the higher ROI indicates a more productive investment.Īnother possible method to calculate ROI is investment gain divided by investment base, or ROI = Investment gain / Investment base. However, the ROI offers a different view: $15,000 divided by $10,000 equals 1.5. It is significantly more than the $200 in net profits generated in the first example. Therefore, this particular investment's ROI is 2 multiplied by 100, or 200%.Ĭompare that to another example: An investor put $10,000 into a venture without incurring any fees or associated costs. Because ROI is most often expressed as a percentage, the quotient should be converted to a percentage by multiplying it by 100. Using the formula above, ROI would be $200 divided by $100 for a quotient, or answer, of 2. If that venture generated $300 in revenue but had $100 in personnel and regulatory costs, then the net profits would be $200. The most common is net income divided by the total cost of the investment, or ROI = Net income / Cost of investment x 100.Īs an example, take a person who invested $90 into a business venture and spent an additional $10 researching the venture. The result is $84.75, which is a 25% reduction in weekly food expenditures.There are multiple methods for calculating ROI. The result is $141.25, which is a 25% increase in weekly food expenditures. How much can you spend? Or, if you want to decrease your weekly food allowance of $113 by 25%, what is your new weekly allowance? Let's say that you spend an average of $113 on food each week, and you want to increase your weekly food expenditures by 25%. Increase or decrease a number by a percentage The result is -3%, which is the percentage of decrease in earnings. The result is 7%, which is the percentage of increase in earnings. What is the percentage of change in your earnings between these two months? Then, if your earnings are $2,425 in January, what is the percentage of change in your earnings between December and January? You can calculate the difference by subtracting your new earnings from your original earnings, and then dividing the result by your original earnings. Let's say that your earnings are $2,342 in November and $2,500 in December. The result is $71.20, which is the sales tax amount for the computer.Ĭalculate the difference between two numbers as a percentage
How much do you have to pay for the sales tax? In this example, you want to find 8.9% of 800. Let's say that want to purchase a computer for $800 and must pay an additional 8.9% in sales tax. The result is $20.00, which is the original price of the shirt.Ĭalculate the amount if you know the total and percentage
On the Home tab, click Accounting Number Format Select the cell that contains the result from step 2. What is the original price? In this example, you want to find 75% of which number equals 15. Let's say that the sale price of a shirt is $15, which is 25% off the original price. Ĭalculate the total if you know the amount and percentage Note: To change the number of decimal places that appear in the result, click Increase Decimal or Decrease Decimal.
0 kommentar(er)
