What Do You Know About ROI?

What do you know about ROI? ROI simply means return on investment. This qualifies an investment to be categorised as a business rather than charitable venture.

What you need to know about ROI

ROI can be defined as a ratio between net profit and cost of investment. A high ROI means the investment’s gains compare favorably to its cost.

Due diligence on ROI metric is key to the success or otherwise of any business be it large, medium or small. It should be of paramount consideration beyond guts-feeling or enthusiasm.

ROI is usually expressed as a percentage and is typically used for personal financial decisions to compare a company’s profitability or to compare the efficiency of different investments.

The formula for calculation is: ROI =(Net Profit/Cost of Investment over a period of time) x 100

For example, an investor buys $1,000 worth of stocks and sells the shares two years later for $1,200. The net profit from the investment would be $200 and the ROI would be calculated as follows:

ROI = (200 / 1,000) x 100 = 20%

The ROI in the example above would be 20%. The calculation can be altered by deducting taxes and fees to get a more accurate picture of the total ROI.

Even venture capitalists who trade in high risk business cannot turn a blind eye to ROI.

What is a Good ROI?

ROI is one of the most used profitability ratios because of its flexibility. That being said, one of the downsides of the ROI calculation is that it can be manipulated, so results may vary between users. When using ROI to compare investments, it’s important to use the same inputs to get an accurate comparison.

Also, it’s important to note that the basic ROI calculation does not take time into consideration. Obviously, it’s more desirable to get a +15% return over one year than it is over two years. https://investinganswers.com/dictionary/r/return-investment-roi

It is advisable you start you start engaging in this financial exercise if you wish to be a successful entrepreneur particularly in a volatile and unregulated sector like print, packaging and publishing value chain. You might even need to engage professionals to handle this,particularly in ventures where marketing contents impact greatly on profit accruable.