All Articles

Return on Investment (ROI) Explained

Return on investment thumbnail

ROI (return on investment) is a ratio that compares the net income (the money you earn minus the money you spend) of an investment to its costs (the money you invest initially or over time). It tells you how much more or less money you make from an investment than what you put into it. A high ROI means your investment is efficient and profitable, while a low or negative ROI means your investment is inefficient and unprofitable

ROI = (Gain from Investment - Cost of Investment) / Cost of Investment

For example, if you invested $10,000 in a business and earned $12,000 after a year, your ROI would be:

ROI = ($12,000 - $10,000) / $10,000 ROI = 0.2 or 20%

This means you made a 20% profit on your investment.
Check out our UT ROI calculator