Return on Investment

The return on investment (ROI) assumes that once all the costs have been recovered for a product, service, and so forth, it can then start generating a profitable rate of return.

To calculate the ROI, some information must be available, such as implementation and operating costs as well as the expected rate of return in the first year. The resulting value is the return on investment for the first year, which is calculated by subtracting the operating and implementation costs from the expected return. The ROI is then calculated for the subsequent years that the product or service will be in effect. The approach is to sum the expected return on investment generated for each year.