Questions and Answers
Return on investment (ROI) is a financial ratio used to calculate the benefit an investor will receive in relation to their ______ cost.
investment
The ROI is most commonly measured as net income divided by the original ______ cost of the investment.
capital
The formula for ROI can be expressed as ROI = Net Income / Cost of Investment ______ 100.
x
If someone makes an initial investment of 50000 and earns 80000, the ROI calculation shows that they have a ______ % ROI on their investment.
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The formula for ROI can also be represented as ROI = Investment Gain / Investment ______ x 100.
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What is the primary factor that the ROI calculation evaluates?
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What is the resulting ROI percentage for an investment of $50,000 that returns $80,000?
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Which variation of the ROI formula indicates the gain from the investment relative to its initial base?
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How does an increase in ROI impact investor decisions?
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Which of the following statements about ROI is true?
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Study Notes
Return on Investment (ROI)
- ROI is a financial ratio that measures the profitability of an investment relative to its cost.
- Higher ROI indicates a better return on investment.
ROI Calculation
- Common formulas for calculating ROI include:
- ROI = Net Income / Cost of Investment x 100
- ROI = Investment Gain / Investment Base x 100
Example Calculation
- Initial Investment: 50,000
- Return Amount (Earnings): 80,000
- ROI calculation:
- Gain from Investment = 80,000 - 50,000 = 30,000
- ROI = (30,000 / 50,000) x 100 = 60%
- The example demonstrates a 60% ROI on the investment.
Return on Investment (ROI)
- ROI is a financial ratio that measures the profitability of an investment relative to its cost.
- Higher ROI indicates a better return on investment.
ROI Calculation
- Common formulas for calculating ROI include:
- ROI = Net Income / Cost of Investment x 100
- ROI = Investment Gain / Investment Base x 100
Example Calculation
- Initial Investment: 50,000
- Return Amount (Earnings): 80,000
- ROI calculation:
- Gain from Investment = 80,000 - 50,000 = 30,000
- ROI = (30,000 / 50,000) x 100 = 60%
- The example demonstrates a 60% ROI on the investment.
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Description
This quiz covers the fundamentals of Return on Investment (ROI), including its definition, calculation methods, and examples. Test your knowledge on how to determine the profitability of investments and interpret ROI metrics effectively.
