How to Calculate ROI (Return on Investment)

Copyright © Stone Evans, The Home Biz Guy
http://www.ReplaceYourSalary.com/pips

ROI (Return on Investment) is probably the most
important calculation one needs to make to ensure
the long-term viability of their business. It is
not enough to build in a profit margin on the
product or service being offered. One must track
with proficiency the amount of dollars being
invested into attracting sales and how much ROI
those dollars put back into the business. If the
investment meets too little return, a product
line is doomed to fail in the long-term.

THE BASIC ROI PERCENTAGE CALCULATION

Many experts seem to agree, “calculating an
accurate return on investment (ROI) is not an
easy thing to do.”

I do not intend to give you a thorough analysis
of the ROI calculation process. Calculating an
accurate ROI is hard to do, but explaining the
full scope of ROI calculations in less than
1000 words is far more difficult.

As such, this article is only intended to
introduce you to the basic concepts behind ROI
calculations. Here is a very basic equation for
calculating the ROI:

ROI = [(Payback - Investment)/Investment)]*100

Your payback is actually the total amount of
money earned from your investment in your
company. Investment relates to the amount of
resources put into generating the given payback.

You should run ROI calculations on both monthly
and yearly timelines.

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