Return on Investment (ROI) calculation is a very popular and has been proved very helpful in past, it is being used to appraise income from an investment and also to evaluate profits on different investments which you are planning to do, so that you can find out which project will be more beneficial for you and will give you more advantages and returns.
Even though it is not important for you to go too deeply into the fundamentals of accurate ROI calculation, just learning the formula for basic ROI calculation should be enough and give you the results which will be help you to take a final decision. For ROI calculations, you will have to divide the benefit of an investment which will be the profit you will get at the end by the total cost of investment.
The formula for this is:
Return on Investment = (Gain from Investment – Cost of Investment) divided by Cost of Investment
Normally you will get the results in the form of percentage, and to get the accurate numbers you will have to multiply the quotient by 100. It is the easiest way and also gives the most accurate and precise idea about how the plans are going to work and how they will benefit you that are the one reason for it to be so much popular specifically among small companies and businesses.
The organization must intend to get a positive ROI; furthermore they should study all the chance which they can get and try to invest only in the projects which shows maximum profit in ROI calculations. There one very essential point that you should keep in mind if you want to get the maximum profit is that you are not investing just the money in the project but you are also giving your precious time and other human resources. Include the value of hours at minimum salary and the money you will be investing in HR. there are many people who do not consider these two factors when they do the calculation and hence their calculated net profit is far from what it should be. This in turn skews up ROI calculation too.
Do the basic Return on Investment calculation by only including the net money and then also do it by including the factor of time and HR and you will be able to see the whole picture. There is no need to feel dishearten or discouraged when the result does not show the answer that you were expecting, you will have to think and try to come up with strategies to rotate picture according to your liking.
No one can tell you surely that you will get profit from your investments because business is a risky thing and market can change in blinks whether it is online or offline so ROI is important to do new investments.