The term Roi represents the acronym in English for "return on investment" or return on investment, it is defined as the financial principle that contrasts the profit obtained in relation to the investment made, that is, it represents an analysis mechanism, from the financial point of view, the performance of the company, project or activity. In order to calculate it, the numerator can allow various definitions of utilities; for example, net profit after tax, profit before tax (BAI), or profit before interest and taxes, while the means to achieve these objectives must be placed in the denominator.
The formula for calculating the Roi is as follows:
ROI = (BAI / average assets) * 100
As you can see, it is a simple reasoning, however, its calculations can become a bit complex when comparing the performance of a company with its balance sheet.
As an example, if a company has average assets of $ 50,000 and makes a profit of $ 5,000; it would have a Roi of 10%. From this example, it can be seen that the higher the Roi, the more profitable the company will be since it will have an ascendant financial profit.
It is important to highlight the importance of Roi in times of economic crisis, since it allows the future investor to be able to specify if their money is being well invested.
Currently, the Roi is being widely used in advertising campaign investments, since it allows to economically quantify the productivity of advertising campaigns, that is, it reflects in detail the profit generated in sales from the investment made by. In this case, to calculate the Roi, sales and costs must be measured based on a period of time elapsed and an attribution of traffic source.
Currently there are tools that facilitate this type of calculations, for example there are Google Adwords and Analytics, which facilitate the extraction of information for subsequent calculation.
Thanks to the Roi calculation, companies will be able to make better decisions when investing in an advertising campaign, allowing them to optimize their budget.
