How to calculate return of investment?

[Setho]

One of the most important things about a business is to be able to predict how the business is going to perform in the long run . There is always a seed capital that you are going to inject into the business and everybody will definitely like to see that this morning is going to grow after sometime. It is particularly ok that you are not going to project any profits or sometimes you might even project losses for your business for some time first but then how are you able to do that .

1. Economy. The first thing to consider when you are calculating your potential return of investment is the state of the economy as the moment and how far it can be able to shift. An economy that is looking to have a high inflation rate is definitely going to mean that your profits are going to reduce or when there is an incoming recession.

2. Competition. The amount of competition that you are receiving for your market is also going to affect your return of investment because which time you are going to see that your market share is going to be reducing gradually has more options are coming up .

 

[Jasz]

ROI stands for return on investment, and as the name suggests, it's a way to measure whether you're getting a good return on your investment.
Basically, it's the amount of money you get back when you subtract what you put into something from what that something makes.
It's important to think about ROI because it helps you make smart decisions about where to put your money. If an investment is going to cost more than it makes, then the answer is simple: don't do it. But if you can see that an investment will bring in more than it costs, then it's probably worth doing.

Return on investment (ROI) is a key metric for any business that needs to see how the money it has invested—in, say, marketing and advertising—is paying off. Return on investment lets you know whether your investment has paid off.

There are two ways to calculate ROI: simple and advanced.

To calculate simple ROI, you take the profit of your investment minus the cost of your investment, divided by the cost of your investment.

Simple ROI = (profit – cost) / cost

For example, let's say you spend $5,000 on Facebook ads in a year. In that same year, you sell 100 widgets at $75 each for a total of $7,500 in revenue. The profit from those sales is therefore $2,500 ($7,500 - $5,000), so the profit from Facebook ads is $2,500. Therefore:

Simple ROI = ($2,500 - $5,000)/$5,000 = -50%