Formula to calculate return on investment percentage

Formulas for calculating return on investment ratio are many. Some of these methods are quite numerous and complicated and as such this doesn't require that you be a newbie trader in the market. It just requires that the trader upgrades his/her to meet the new realities of the fore market. The forex market is getting tougher as each day passes and as such every trader should be abreast with the latest knowing in the market to avoid being left behind when others are making it big in the market. For this to occur, the trader has to at every time to be willing to get the basic knowledge in this case formulas needed to get the forex market towards his/ her side. The Rate of return on investment is simply the profit or loss gained for every investment incurred by a trader usually expressed on ratio. The higher the ratio the more gains the trader tends to make. Therefore, every trader should strive to fight for higher ratio on every investment he/ she takes on to reap the reward of the market.

Best method of computing the return on investment is through the cash flow method illustrated here;

For many businesses this is one of their biggest problems and to beat this problem is to incur the services of an expert in forex trading to carry out calculations on the profit/loss margin on an investment which only brings more expenses to the company if only they learnt how to calculate the ROI. Calculation of the ROI is not that complicated and could be done in the following way;

To calculate the ROI is quite done best through the cash flow method as illustrated below;

  1. Purchase a good spreadsheet then use the Microsoft excels to conduct this spreadsheet, but for sharing purposes I greatly recommend the trader to use the Google documents because it's easier to send and more users friendly.

  2. Draw out a single row illustrating the number of years for an investment to mature but preferably it's advisable to draw this on a 10 years basis/plan.

  3. During the first period tend to illustrate all investments coming in with a minus sign. This shows that investors are made room for their investment and later on should be deducted from the total gains after the investments have gone through.

  4. After the 10th year of a viable investment it should be illustrated in the columns regulated for their input which should be a plus sign and indicate growth in the business portfolio after every ten years of an investment.

  5. Immediately, plus the two rows to know the rate of return on investment which should indicate profit/loss margin.

  6. Plus the total rows of the 10 year’s period to know the total cash flow accrued to the company after the two 10 years period.

  7. Lastly, then calculate the two numbers. The word "multiple" means that the total money lost divided by the total gained.  Then use the IRR function method to calculate the annual return on investment ratio.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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