What is ROI?

[jasminelane]

What is ROI?benefit of using ROI?

[Petunia 100]

What is ROI?benefit of using ROI?

ROI is short for return on investment. For every dollar invested, x is returned. It is a way to evaluate how well an investment performs.

[jIM_Ohio]

ROI is return on investment.

It is probably best used on cash flow types of investments.
For deposit type investments, using return is probably better.

For example, in my IRAs and retirement investments (where I deposited money), I use annual return, 5 year return and similar measures.

For rental property, business investments and similar, where cash flow is coming in regularly, it is better to use ROI in many cases.


For example if I have $120k to invest, maybe I put $100k into a mutual fund.
I might then take $20k and purchase a rental property for valued at $100k (20% down), and that rental property might generate $1000/mo in income.

If at end of year the mutual fund has $110k, that is a 10% annual return.
At end of year the rental generated $12,000 in income on a $20,000 deposit. After expenses (mortgage, taxes), maybe the rental generated $4000 in profit. ROI would be $4000/$20,000=20% which is very good.

[Max G]

"I" portion of ROI doesn't necessarily have to be a cash investment. It could be investment of time or effort as well. You can also calculate ROI by assigning monetary value to the amount of time you would need to spend on specific project.

[ecoadapt]

ROI is return on investment.

It is probably best used on cash flow types of investments.
For deposit type investments, using return is probably better.

For example, in my IRAs and retirement investments (where I deposited money), I use annual return, 5 year return and similar measures.

For rental property, business investments and similar, where cash flow is coming in regularly, it is better to use ROI in many cases.


For example if I have $120k to invest, maybe I put $100k into a mutual fund.
I might then take $20k and purchase a rental property for valued at $100k (20% down), and that rental property might generate $1000/mo in income.

If at end of year the mutual fund has $110k, that is a 10% annual return.
At end of year the rental generated $12,000 in income on a $20,000 deposit. After expenses (mortgage, taxes), maybe the rental generated $4000 in profit. ROI would be $4000/$20,000=20% which is very good.

Well explained, i just like to add. Most forms of ROI analysis compare investment returns and costs by constructing a ratio, or percentage. In most ROI methods, an ROI ratio greater than 0.00 (or a percentage greater than 0%) means the investment returns more than its cost.

[ella101]

Cobuckz Saver

Once you get your ROI, that means your business is already earning...