Investing · 1 min read
ROI Explained: What It Is and How to Calculate It
Return on investment is one of the most fundamental metrics in finance. Here is exactly how to calculate and interpret it.
roiinvestingreturnsfinance basics
Return on investment, or ROI, shows how much was gained or lost relative to what was put in. It is one of the simplest ways to compare opportunities.
How ROI Works
ROI = (Gain - Cost) / Cost × 100
For example, if $1,000 was invested and $1,250 was received back, the ROI is 25%.
Why It Matters
ROI is useful because it standardises results. A 20% return on $100 is not the same as a 20% return on $100,000, but ROI allows direct comparison.
Written by
FinToolSuite
This article is for informational purposes only and does not constitute professional advice.