Question

what is the formula for determining a return on investment (roi)? roi = (net profit + cost of investment) × 100 roi = (net profit / cost of investment) × 100 roi = (net profit / cost of investment) / 100 roi = (net profit - cost of investment) × 100

Explanation:

Return on Investment (ROI) measures the profitability of an investment relative to its cost. The formula is calculated by dividing the net profit (the gain from the investment) by the cost of the investment, and then multiplying by 100 to express it as a percentage. So we check each option:

• The first option adds net profit and cost of investment, which is incorrect.
• The second option, \( \text{ROI} = (\text{Net profit} / \text{Cost of investment}) \times 100 \), follows the correct calculation for ROI as a percentage.
• The third option divides by 100, which would incorrectly reduce the value instead of expressing it as a percentage.
• The fourth option subtracts cost of investment from net profit, which is not the correct way to calculate ROI.

Answer:

B. \( \text{ROI} = (\text{Net profit} / \text{Cost of investment}) \times 100 \) (assuming the second option is labeled B; if the original options had labels like A, B, C, D, adjust the label accordingly based on the second option's position)