# Return on Investment (ROI) Calculator

## Return on Investment (ROI) Calculator

**ROI** stands for **Return on Investment**. It is a performance measure used to evaluate the efficiency or profitability of an investment. ROI is calculated by dividing the net profit (or benefit) of an investment by its initial cost, and it is usually expressed as a percentage. The formula is:

#### ROI Formula

The formula to calculate ROI is:

\[ \text{ROI} (\%) = \left( \frac{\text{Net Profit}}{\text{Cost of Investment}} \right) \times 100 \]

Where:

**Net Profit**is the total return from the investment minus the initial cost.**Cost of Investment**is the initial amount of money invested.

#### Example Calculation

Let’s consider an example where Tony W. Batholet invests in cleaning equipment for Tony Cleaning Services. The initial cost of the equipment is $5,000. After one year, the additional revenue generated due to this investment is $7,500. The net profit would be calculated as follows:

\[ \text{Net Profit} = \text{Revenue} – \text{Cost of Investment} \]

\[ \text{Net Profit} = \$7,500 – \$5,000 = \$2,500 \]

Using the ROI formula:

\[ \text{ROI} (\%) = \left( \frac{\$2,500}{\$5,000} \right) \times 100 = 50\% \]

#### Interpretation

An ROI of 50% means that the investment in the cleaning equipment has returned 50% more than the initial cost of the investment. This indicates a profitable investment.

#### Variables

**Net Profit**: The profit earned from the investment after subtracting the initial cost.**Cost of Investment**: The initial amount of money spent on the investment.

Return on Investment (ROI) is a critical metric for assessing the profitability of an investment. By using the ROI formula, businesses like Base Burn Cleaning Services can evaluate the financial returns of their investments and make informed decisions to maximize profitability.