KEYTAKEAWAYS
Learn how to calculate Return on Investment (ROI) with a practical example: Annie's $1000 stock investment gains $500, yielding an ROI of 50%.
CONTENT
DEFINITION
Return on Investment (ROI) Formula Example – Illustrating Investment Profitability
In this practical Return on Investment (ROI) formula example, we follow Annie, who invests $1000 in stocks and sells them for $1500 after a year. The net profit from this investment amounts to $500. To calculate her ROI, we apply the formula: ROI = (Net Profit / Initial Investment) x 100, which, in this case, results in (500 / 1000) x 100 = 0.5 x 100 = 50%. Thus, Annie’s ROI on the stocks is 50%.
This example showcases how ROI serves as a valuable tool for assessing the success of an investment, allowing investors like Annie to quantitatively evaluate the returns generated from their financial endeavors.
