ROI meaning is “return on investment”. It is a ratio or percentage value that reflects the profitability or efficiency of a certain trade or investment. It is able to easily generate an absolute ratio (e.g., 0.45) or a value in percentage (e.g., 45%). As such, ROI can also be used when comparing different types of investments or multiple trading operations.
Specifically, ROI evaluates the return on an investment in relation to its purchasing cost. This means that the calculation of ROI is simply the return (net profit) divided by the total acquisition costs (net cost). The result may then be multiplied by 100 to get the percentage value.
Naturally, a high ROI value indicates that the investment was profitable, while a negative ROI means the return was lower than the costs. The calculation of ROI is based on the following equation:
ROI = (Current Value - Total Cost) / Total Cost
OR:
ROI = Net Profit / Net Cost
As an example, imagine that Alice bought 100 BNB for 1,000 US dollars - paying 10 dollars each. If the current price of BNB is 19 dollars, Alice would have an ROI of 0.90 or 90%.
However, this does not take into account the amount of time spent. For example, an ROI of 90% that took 1 year will not be as profitable as another investment with an ROI of 70% that took 6 months.
In conclusion, ROI meaning is “return on investment”, which basically gives traders a good gauge on whETHer the investment can bring about good profits.
