Return on Investment (ROI) measures the efficiency of an investment:
Basic ROI Formula: ROI = (Gain from Investment - Cost of Investment) / Cost of Investment × 100
Example: - Investment: $10,000 - Return: $12,000 - ROI = ($12,000 - $10,000) / $10,000 × 100 = 20%
Key Components: - Initial investment amount - Final value or return - Time period considered - Additional costs or fees
Different ROI applications require specific approaches:
Marketing ROI: - Revenue generated from campaign - Total marketing spend - Customer acquisition costs - Lifetime value considerations
Business Project ROI: - Project costs and expenses - Revenue or cost savings generated - Implementation timeline - Ongoing operational impacts
Investment ROI: - Purchase price and fees - Dividends or interest received - Current market value - Tax implications
ROI measures investment efficiency as a percentage
Include all costs and returns for accurate calculation
Different investments require different ROI approaches
Consider time value of money for long-term investments