What information is used in calculating ROI?
Posted: Thu Jan 23, 2025 3:25 am
ROI uses some simple data that, on their own, are not capable of producing useful information for managers. These are: total revenue and the value of the investment. When looking at these data separately, they translate practically nothing.
Revenue shows how much money came into the company's cash flow, while investments represent the outflow of resources intended for some type of improvement in the company. However, when they are combined in a single calculation formula, the scenario changes. ROI uses the variables in a single equation whose result represents the efficiency or inefficiency of the investments made.
The calculation formula is simple. Simply subtract the total revenue japan phone number list the amount invested and divide the result by the amount invested. If you want to obtain the ROI as a percentage, the final value should be multiplied by 100.
To illustrate, imagine that your company invested R$50,000 in sponsored links on a search engine. Through this investment, your company obtained revenue of R$85,000.
Plugging the values into the formula, we have: (R$85,000 – R$50,000) / R$50,000 = 0.70. Therefore, the return on investment was 0.7, or 70%. With this number, a manager can compare the return obtained with other investments, which will provide relevant information for decision-making .
COMPLETE GUIDE E-book - how to define and monitor your company's metrics and indicators
Revenue shows how much money came into the company's cash flow, while investments represent the outflow of resources intended for some type of improvement in the company. However, when they are combined in a single calculation formula, the scenario changes. ROI uses the variables in a single equation whose result represents the efficiency or inefficiency of the investments made.
The calculation formula is simple. Simply subtract the total revenue japan phone number list the amount invested and divide the result by the amount invested. If you want to obtain the ROI as a percentage, the final value should be multiplied by 100.
To illustrate, imagine that your company invested R$50,000 in sponsored links on a search engine. Through this investment, your company obtained revenue of R$85,000.
Plugging the values into the formula, we have: (R$85,000 – R$50,000) / R$50,000 = 0.70. Therefore, the return on investment was 0.7, or 70%. With this number, a manager can compare the return obtained with other investments, which will provide relevant information for decision-making .
COMPLETE GUIDE E-book - how to define and monitor your company's metrics and indicators