What is ROI (Return on Investment)

29/05/2020

The acronym ROI is the abbreviation for the words Return on Investment, or Return on Investment. From the application of this indicator, it is possible to evaluate the performance of an investment and know how much money the company is gaining or losing. Thus, it is essential for companies to monitor ROI, as it guarantees a better analysis of financial returns.

ROI can be used to analyze any type of investment, whether it is the hiring of a company specialized in management consulting, training, acquisition of machines and etc.

It is important to highlight that ROI can be useful to improve the results of your company and it is essential that each investment is well used and has an impact on the final results.

How to calculate ROI (Return on Investment)?

The calculation of the Return on Investment can be done with an extremely simple formula. All you need to know is the amount that was spent on a particular project or strategy and the financial return that this action brought to the company.

So, it is necessary to subtract the gain obtained from the investment of the initial investment itself, dividing this result by the initial investment. The formula is:

ROI = (Gain - investment) / investment
Let's look at an example: if with a certain action that cost R $ 100,000.00 your company earned R $ 500,000.00, you must subtract the investment gain, which results in R $ 400,000.00, dividing by the investment. So, the end result is 4.

An ROI 4 for a given stock indicates that the return was 4 times the initial investment.

It is worth remembering that the final result can vary a lot. It all depends on the action taken, the quality of the planning, the execution, among other details.

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