Which formula is used to calculate the return on investment (ROI)?

The formula for calculating return on investment (ROI) is based on the relationship between the net profit generated from an investment and the initial cost of that investment. The correct formula shows how efficiently an investment has performed by expressing the net profit as a percentage of the cost of the investment.

Specifically, ROI is calculated using the net profit achieved from the investment divided by the cost of that investment, and then multiply that result by 100 to get a percentage. This percentage provides an easy way to compare the profitability of different investments or evaluate the efficiency of a single investment.

In contrast, the other formulas provided do not accurately represent ROI. One suggests using the cost of investment in the numerator, which would yield a distorted view of the investment's performance. Another relates revenue to total assets, which pertains to asset efficiency rather than direct investment returns. The last option relates total assets to liabilities and revenue, which does not pertain to ROI and instead looks at the balance sheet's equity perspective. Understanding these distinctions is crucial for accurately assessing investment performance.