The ROI concept is obtained from the acronym of the English words 'Return on Investment', which translated into Spanish means Return on Investment. It is an economic ratio widely used in the financial field to study the profitability of balance sheets, accounts, companies and brands.
In a direct and simple way, it shows the economic value achieved once a certain budget has been invested to carry out actions, which can be campaigns of marketing, projects, purchase of companies, etc.
The objective is that the result obtained provides the real return obtained from an economic investment.
How to calculate ROI?
The ROI formula is very simple and is usually expressed as a percentage.
ROI = (Income - Investment) / Investment
To better understand the meaning of ROI we will use an example. A company allocates 1.000 euros in an advertising campaign to promote its English courses. At the end of it, you will get a profit of 2.500 euros from student enrollment. This means that the return on investment or ROI will be 1,5%, so for every euro invested in the course they will get a return of 1,5 euros.
This figure is very important to analyze the viability of the project. In the event that the return is positive, it will imply that the project will be profitable, while when it is negative, money will be lost.
The ROI calculation is essential to address possible investments in the future. The company will have enough data to evaluate which projects are more profitable and which should be the path to be taken by the company.
The return on investment allows measuring different aspects, such as a specific action, a campaign, the profitability from an area or even a company. Fortunately, we now have tools that make that job easier, such as professional ROI calculator offered by Numdea.
You only need to know the investment and the reaped profit to obtain this figure.