Calculate return on investment (ROI) is one of the many methods of calculations that must be applied in business. Calculating ROI allows businesses are able to set the amount of revenue from the investment of money or other resources.
According to the explanation from Wikipedia, the ROI or in the Indonesian language is named as the return on investment is the ratio of money gained or lost on an investment. The size of ROI relative to the money invested and is commonly expressed in percentage instead of a decimal system.
ROI is also known as the rate of profit (rate of profit) or the result of an investment at this time, past or future predictions. ROI does not indicate how long the investment is managed. However, ROI is often expressed in terms of the fiscal or calendar year.
It could be concluded, ROI mostly used by a company to compare the results of the investment, ie how much is earned or how many are missing. The comparison is not easy when using the monetary value.
Then how to calculate the ROI with simple techniques that can understand a lot? Here is a trick to calculate ROI with a case study according to eHow.com.
Suppose ABC company invest Rp1 million for promote their products through advertising. From the advertising campaign, the company ABC attained phone feedback in the form of 150 of which 50 of them are interested to purchase the promoted product. Total sales were obtained at 5 million. Well, a mathematical equation to calculate the ROI is as follows:
= ROI (return on investment – the initial investment) / investment as x (100)
The first step is to calculate the ROI is the return on investment as describe, in the case study above is the total sales of 5 million.
After that, find out how much initial investment. In the case of ABC company, the initial investment in the form of investment that is used for an advertising campaign that is Rp1 million.
Now do the calculation using the formula mentioned above. ROI = [(5000000-1000000): 1,000,000] x 100
The result is 400 and when expressed as a percentage to 400%. That figure means that ABC company has a return on investment of 400 percent