What is the missing variable in the ROI calculation formula?

What is the missing variable in the ROI calculation formula?

• A. Total Return (value)
• B. Annual Revenue
• C. Total Investment (cost)
• D. Net Profit

Answer: (C)

In the context of calculating Return on Investment (ROI), the formula typically used is: ROI = (Net Profit / Total Investment) × 100 For you to determine the ROI, you need both the net profit generated from the investment and the total investment (or cost) involved in making that investment. The total investment is crucial because it serves as the denominator in the ROI calculation, allowing you to measure how much profit is earned as a percentage of the initial investment. Without specifying the total investment, you would have no basis for understanding the returns in relation to what was spent. This makes it a fundamental component of the formula. By identifying the total investment, you can effectively gauge the success of an investment in generating returns, which is precisely what ROI aims to measure.

In the context of calculating Return on Investment (ROI), the formula typically used is:

ROI = (Net Profit / Total Investment) × 100

For you to determine the ROI, you need both the net profit generated from the investment and the total investment (or cost) involved in making that investment. The total investment is crucial because it serves as the denominator in the ROI calculation, allowing you to measure how much profit is earned as a percentage of the initial investment.

Without specifying the total investment, you would have no basis for understanding the returns in relation to what was spent. This makes it a fundamental component of the formula. By identifying the total investment, you can effectively gauge the success of an investment in generating returns, which is precisely what ROI aims to measure.