Formula
ROI = (Net Profit / Investment Cost) × 100
Calculation Example
If an investment of $10,000 generates a net profit of $2,000, ROI = (2,000 / 10,000) × 100 = 20%
Data Source
Financial statements, investment records
Tracking Frequency
Quarterly, Annually
Optimal Value
Higher is better; depends on industry and risk tolerance.
Minimum Acceptable Value
ROI should be positive and higher than the cost of capital.
Benchmark
Stock market ROI ~7-10%, real estate ROI ~8-12%
Recommended Chart Type
Bar chart (to compare different investments), Line chart (for trend analysis)
How It Appears in Reports
Displayed as a percentage in investment and financial reports.
Why Is This KPI Important?
Helps businesses assess whether investments are generating value.
Typical Problems and Limitations
Does not account for time value of money, may not include indirect costs.
Actions for Poor Results
Reevaluate investment strategy, cut costs, focus on higher-return opportunities.
Related KPIs
Net Profit Margin, EBITDA, Return on Assets (ROA)
Real-Life Examples
A company increased ROI by switching to digital marketing, reducing costs while increasing customer reach.
Most Common Mistakes
Ignoring indirect costs, using short-term gains instead of long-term returns.
