What is ROI

Crypto for Advanced
> 3 min. read
What is ROI

ROI is the ratio of net profit over the total cost of the investment.

ROI or Return On Investment is a comparison between an investment's monetary value and its cost. (Profit minus cost) / cost is the ROI formula. Your return on investment (ROI) would be 0.9, or 90%, if you made $10,000 from a $1,000 investment. An investing calculator is also a good way to get this information. Return on investment (ROI) can be used to evaluate the prospective profitability of a certain investment, your marketing initiatives (for marketing accountability), or when formulating business strategies to start your company. A related statistic is return on ad spend (ROAS), however it focuses on specific methods, such as a single marketing campaign to develop your firm.

Formula for the ROI is following:

ROI = (Net profit / investment) x 100

You multiply with 100 in the end if you want percentage, if you want just the ratio, then you do the calculation without multiplying.

When it comes to determining the advantages and financial returns on your investment, ROI is most beneficial when it refers to something solid and measurable. The most common technique of analysing investments is in terms of monetary cost because it is the easiest to measure, but it is also possible to compute ROI using time as an investment. Return on equity, return on ad expenditure, return on assets, social return on investment, and other sorts of investments and sectors use the ROI statistic or figure.

Example of calculating ROI on crypto investment:

Let’s say you find a cryptocurrency that you really like, and you think it will perform well. The price of X coin is 10 USD. You decide to buy 100 coins, meaning you invest 1000 USD. Over the time the price of the X coin went up for 20 USD, which makes you satisfied and you decide to sell the 100 coins at the price of 30 USD per X coin. Your profit therefore is 3000 USD, but the net profit is 2000 USD (you took away the initial investment). The calculation for this example is as follows:

ROI of investment in X coin = (2000 USD / 1000 USD) x 100 = 200%

Based on the calculation, the ROI of mention investment was in the ratio of 2, or 200%.

The calculation of ROI is very important in business as well as investing because it helps you to calculate and stay on the profitable way. One should also want to see from which investments he had the most profit.

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