Investment naturally needs return, and return on investment refers to the value that should be returned through investment. Simply put, it refers to the economic rate of return obtained by an enterprise from an investment activity.

The calculation formula of return on investment is: return on investment = (annual profit or average annual profit/total investment) × 100%.

Simply put, it is profit/investment. It can be seen from this calculation formula that enterprises only need to reduce investment, that is, reduce costs, if they want to increase profits. If you want to improve the return on investment, you can improve the efficiency of asset utilization.

For example:

For example, if I open a shop, the purchase cost is 10000 yuan, and then this batch of goods is bought at the price of 15000 yuan, then my return on investment = (15000-10000)/10000 = 50.

Because investment basically requires loans, the total investment must be greater than the bank loan interest rate in the same period to earn, otherwise it is likely to lose money.

What is the return on investment?

Return on investment is a static analysis method, which is used to calculate the income and depreciation amount under normal production and operation conditions after the project is put into production. Amortization of intangible assets is the time required for the full investment recovery of the project, and it is compared with the payback period of the industry benchmark investment.