Calculation methods and steps of return on Investment
Return on investment (Return on Investment)YellowbassROI) is an important index to measure the relationship between investment income and cost, and it is widely used in the financial field. This article will describe in detail the formulas and steps for calculating the return on investment to help you understand this concept more deeply.
I. the formula for calculating the rate of return on investment
The formula for calculating the rate of return on investment is relatively simple and can be obtained from the following formulaYellowbass:
ROI = (return on investment-investment cost) / investment cost * 100%
Among them, the investment income refers to the net income brought by the investment, and the investment cost refers to the initial capital needed for the investment. Through this formula, we can calculate the rate of return on investment and understand the profitability of the investment.
II. Steps for calculating the rate of return on investment
To calculate the return on investment, we need to follow these steps:
oneYellowbass. Determine the investment target and time limit. Before making an investment, we need to make clear the investment target and time limit, such as buying stocks, investing in real estate and so on. The investment period can be short, medium or long term.
twoYellowbass. Calculate the investment cost. The investment cost includes the initial capital and other related expenses required for the purchase of investment products, such as handling fees, taxes, etc. Ensure that all costs are taken into account to obtain accurate investment costs.
3. Calculate the return on investment. Investment income refers to the net income generated by investment, including capital income, dividends, interest and so on. It should be noted that investment income should be deducted from relevant taxes and fees.
4. Apply the calculation formula. The return on investment can be obtained by substituting the investment income and investment cost into the formula.
III. Illustration with examples
The following is an actual calculation of the return on investment:
Project amount (yuan) initial investment cost 100000 investment income (before tax) 15000 related taxes 2000 net investment income 13000Based on the case data, we can calculate the return on investment:
ROI = (13000-100000) / 100000 * 100% =-87%
In this case, the return on investment is-87%, indicating that the investment failed to make a profit, but suffered a loss.
Through the above, we can understand the calculation formula and steps of the rate of return on investment, so as to better evaluate the profitability of investment projects. In practice, investors should flexibly use the rate of return on investment according to specific conditions in order to achieve the investment goal.
