If you want to know how much your investment is paying off, then Return On Investment (ROI) is the possible guide. With our free online ROI calculator, you can easily calculate your ROI based on your gross revenue and investment cost.

## Important information regarding ROI calculation

**1. What is ROI?** ROI (Return On Investmen) is well-know metric
in finance used for whether or not to undertake an investment. ROI is a ratio
between net profit and cost of investment.

**2. How ROI is calculated?** Calculating ROI is very simple with
the following formula: ROI = [(Gross profit – Investment) / Investment].

**3. Is ROI a good measurement / indicator tool
for making investment decisions?** As a decision tool, it is simple to understand. The simplicity of the
formula allows users to freely choose variables, e.g., length of the
calculation time, whether overhead cost is included, or which factors are used
to calculate income or cost components. To use ROI as an indicator for
prioritizing investment projects is risky since usually the ROI figure is not
accompanied by an explanation of its make-up.

**4. ROI calculation example**: Let’s say Peter started a chicken
farm and invested a total of 3.5 million USD in one year. During this period,
the total cost was USD 2 million. Using the formula above, the ROI will be 75
percent which sees to be a good one.

**5. How do we interpret ROI?** The bigger the better the
investment and the smaller (even minus value) the more to be avoided or got rid
of. If your ROI is zero percent, it means there is no profit.