How do you use the ROI formula on Excel?

How do you use the ROI formula on Excel?

To use the ROI (Return on Investment) formula in Excel, follow these simple steps:

ROI Formula

The general formula for ROI is:

ROI=Net ProfitInvestment Cost×100ROI = \frac{{\text{{Net Profit}}}}{{\text{{Investment Cost}}}} \times 100ROI=Investment CostNet Profit​×100

Where:

• Net Profit = (Revenue or Gains from Investment) - (Cost of Investment)
• Investment Cost = The total amount of money invested.

Steps to Use the ROI Formula in Excel:

1. Input the Values:
   • In Excel, enter your investment cost and the gains or revenue from the investment in two separate cells. For example:
     • Cell A1: "Investment Cost" (e.g., $5,000)
     • Cell A2: "Revenue" (e.g., $7,000)
2. Calculate the Net Profit:

In cell B1, calculate the Net Profit using the formula:
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=A2 - A1

3. This will subtract the Investment Cost from the Revenue to give you the Net Profit.

4. Apply the ROI Formula:

In cell C1, use the following formula to calculate the ROI:
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=(B1 / A1) * 100

5. This formula divides the Net Profit (from cell B1) by the Investment Cost (from cell A1), and then multiplies the result by 100 to express ROI as a percentage.

Example:

• Investment Cost: $5,000 (entered in A1)
• Revenue: $7,000 (entered in A2)

Steps:

1. Net Profit in B1: =A2 - A1 → $7,000 - $5,000 = $2,000

2. ROI in C1: =(B1 / A1) * 100 → ($2,000 / $5,000) * 100 = 40%

Result:

• ROI = 40%

This means you have a 40% return on your investment.

Tips:

• Make sure all your values are in the same units (e.g., dollars, euros).
• If your formula needs to handle negative values (for losses), the same method applies, but the ROI will be negative.