1. What is ROI?

Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of several different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment's cost.

2. How Does the Calculator Work?

The calculator uses the ROI equation:

Where:

• \( ROI \) — Return on Investment (percentage)
• \( gain \) — Net profit from the investment (USD)
• \( cost \) — Cost of the investment (USD)

Reverse Calculations: The calculator can also solve for cost or gain when ROI and the other variable are known.

3. Importance of ROI Calculation

Details: ROI is crucial for making business decisions, comparing investment opportunities, and evaluating the efficiency of different investments.

4. Using the Calculator

Tips: Select what you want to calculate (ROI, Cost, or Gain), then enter the required values. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROI percentage?
A: A "good" ROI depends on the investment type and risk. Generally, an ROI of 7-10% is considered good for stock market investments.

Q2: Can ROI be negative?
A: Yes, negative ROI means the investment resulted in a net loss.

Q3: What are the limitations of ROI?
A: ROI doesn't account for the time value of money or the holding period of an investment.

Q4: How is ROI different from ROIC?
A: Return on Invested Capital (ROIC) measures how well a company uses its capital to generate profits, while ROI measures the return on a specific investment.

Q5: Should I use ROI for long-term investments?
A: For long-term investments, metrics like IRR (Internal Rate of Return) may be more appropriate as they account for the time value of money.