Actually, the ROI is short for of Return on Investment. This return is provided to the investor as a result of income accrued on account of investing in some specific field. Maximum cases have been seen where a simple investment works a lot to earn a better return. Normally, it can also be said that this return is the reward of investment. All the investments are subject to market risk but in majority of the investments, some good returns come and this advantage goes to the concerned investor. Such return is called the Return on investment. You can also calculate the ROI as percentage because this amount is a specific percentage of your invested amount.
The return may be fluctuating according to market
It may be increase or decrease according to the market conditions applied. In case you invested an amount on a stock and later its price raised. You sold the same on one and half time more it means your total return will be (investment cost – return). Your percentage of profit will be 50% on total investment. This return may be fluctuating. This process is not only aimed at investment but you can use this formula on all the aspects related to your business. You can use the same formula on real estate business, investing in bonds and many more with same process.
Some other business can also be calculated for ROI
In case you are doing this calculation for any other business, the process may be harder because of the structure of business and way of investment. Most of the factories, the term ROI are replaced with ROCI because they consider the investment of capital. They also count the deterioration of the fixed assets too. In such cases, the calculation also becomes tougher. In some of the factories, this term is also referred as the Annual Growth Rate. Companies assume that they will cover a specific level in investment and profit too. But on many fronts their assessment fails. In some sectors they achieve better results and somewhere below than expectations. In such a way they calculate the + – both and then finally calculate the percentage of return. In case you have invested money through financing from any agency and got a profit.
How you will calculate your return because investment was not from your pocket, you are liable only to re-pay a fix installment and in such a scenario, your calculation will be more difficult. In such a way, the percentage gained should be divided from the money invested and the EMI minus from total amount. If the return is more than that it means you are going in plus.