Return on Investment Practice

Front

What is Return on Investment (ROI)?

Back

Return on Investment (ROI) is a financial metric used to evaluate the profitability of an investment, calculated as the net profit divided by the initial cost of the investment, expressed as a percentage.

Front

How do you calculate the simple Return on Investment?

Back

Simple Return on Investment is calculated using the formula: ROI = (Net Profit / Initial Investment) x 100.

Front

If an investment of $1000 generates a profit of $200, what is the simple return on investment?

Back

20%.

Front

A company invested $5000 and earned a profit of $1000. What is the simple return on investment?

Back

20%.

Front

What is the simple return on investment if the initial investment is $10000 and the final value is $12000?

Back

20%.

Front

By spending $6,000 on a home renovation, Karen increased the value of her home from $275,000 to $325,000. What is her return on this investment?

Back

16%.

Front

What is the simple return on investment if the initial investment is $5000 and the final value is $6000?

Back

20%.

Front

What does a 20% ROI indicate about an investment?

Back

A 20% ROI indicates that for every dollar invested, there is a profit of 20 cents.

Front

What is the significance of a negative ROI?

Back

A negative ROI indicates that the investment has resulted in a loss rather than a profit.

Front

What is the difference between simple ROI and compound ROI?

Back

Simple ROI measures the return on an investment over a single period, while compound ROI takes into account the effects of compounding over multiple periods.