ROI, short for return on investment, measures how much profit the company generates for every dollar of investment. ROI helps investors determine which investments are most profitable, because profit alone does not give a complete picture. For example, a company with a $1 million profit that has $100 million of investment only returns 1 cent for each dollar invested, while a company with a $100,000 profit but only $1 million invested returns 10 cents per dollar. If you know know a company's ROI and how much was invested, you can calculate the company's profit.
1. Divide the ROI by 100 to convert it from a percentage to a decimal. For example, if the ROI equals 6 percent, divide 6 by 100 to get 0.06.
2. Calculate the sum of the money invested in the company. For example, if three investors each invest $100,000 each, the total invested equals $300,000.
3. Multiply the total invested by the ROI expressed as a decimal to calculate the profit. In this example, multiply $300,000 by 0.06 to find the company's profit equals $18,000.
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