What is the meaning of ROI?
ROI or Return on Investment is the process by which you figure out what amount of money you are earning (or have made) as compared to what you spend. In simple words, ROI is how you determine whether the amount you have invested in something is worth it or not.
The formula to calculate your ROI is the dividend of your net profit and cost of your investment multiplied by 100.
ROI = Net profit/Cost of Investment X 100
For example, let’s say you bought a property, the ROI you get on this property will show you whether this investment was a success or not, and how profitable was this for you. Or, if you had made this investment in stocks, then your ROI will show you the amount of money you earned.
What is an ROI Calculator?
As the name suggests, ROI calculator is the tool that helps you measure how much profit you have earned in a particular investment that you made. The tool can also enable you to understand how much returns you’re getting over time on that investment in various time frames.
All you have to do is enter the amount you invested initially, the amount you made (or earned back), and the time for how long you have been investing. The ROI calculator will show you the total gain you have made on that investment. A good ROI calculator will also show you the absolute return, your annualized return, and the compound annual growth rate you made (CAGR).