Encyclopedia > Return on investment

  Article Content

Return on investment

The return on investment (ROI) is a calculation used in business used to determine whether a proposed investment is wise, and how well it will repay the investor. It is calculated as the ratio of the amount gained (taken as positive), or lost (taken as negative), relative to the basis. The basis is the amount risked ("invested") to obtain that gain or loss, and is always positive.

In mathematical terms, the ROI is (Vf - Vb) / Vb, where Vf is the final value and Vb is the basis.

Interestingly, to compensate for a negative ROI one needs a positive ROI that is higher in magnitude. For example, to recoup a 50% loss one needs to realize a 100% gain.

All Wikipedia text is available under the terms of the GNU Free Documentation License

  Search Encyclopedia

Search over one million articles, find something about almost anything!
  Featured Article

... power, from the Greek language turannos. In Classical Antiquity[?] it did not always have inherently negative implications, it merely designated anyone who assumed ...

This page was created in 30.7 ms