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ROI (Return on Investment)

If you want to invest in something you usually expect more return than you paid for it. Knowing how much you should invest to achieve a certain profit is very useful.

Return on Investment (ROI)

Is the value created from an investment of the resources, or the time.  Most people are considering ROI only from a financial point of view: If, for example, you invest 100000 CZK and the profit is 10000 CZK, then the ROI is 10%:

(100 000 + 10 000)/100000 = 1,1, neboli 10%.

If your ROI = 100%, then you doubled your initial investment.

ROI allows you to decide between two investment opportunities. If you deposit money in a savings account, the ROI is equal to the interest rate that the bank gives you to hold your money. Why put your money in your account that pays a 1% interest, if you can deposit it in an account that pays 2% with no difference in fees?

The usefulness of the ROI goes far beyond financial calculations. You can also use the calculation for other Universal Resources as well. "Return on Investment Time" is an elegant and useful way of evaluating your efforts. If you were to work 24 hours a day for a 1 year to earn 1 000 000 CZK, would you do that? If you evaluate your invested time and mental health, it doesn't make sense.

The return on every investment is always directly related to how much the investment cost. The more money (time) you spend, the less revenue you get. Even certain investments, such as buying a house or obtaining a degree from college, do not make sense if you pay too much for them. The calculation of yield, return is always a certain exercise, which is based on the predicated of the future, which is in principle uncertain.

The actual ROI can be calculated reliably at the time when investment is already completed, and returns is collected. In the real world, it is always very uncertain to predict the future, moreover, the uncertainty increases the risk that needs to be experience. Then the calculation of each future ROI is only half an individual estimate.