What is meaning of ROI? Please tell me in detail.

Hi Chaitanya,

The following points will help you to know about ROI:

• Return on investment (ROI) measures the gain or loss generated on an investment relative to the amount of money invested. 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 return on investment formula is: ROI = (Net Profit / Cost of Investment) x 100.
• Example:

The ROI calculation is flexible and can be manipulated for different uses. A company may use the calculation to compare the ROI on different potential investments , while an investor could use it to calculate a return on a stock .

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 .

The same calculation can be used to calculate an investment made by a company. However, the calculation is more complex because there are more inputs. For example, to figure out the net profit of an investment , a company would need to track exactly how much cash went into the project and the time spent by employees working on it.

Hope this helps. All the best!!