1. What is Return on Investment (RoR)?

Return on Investment (RoR) is a performance measure used to evaluate the efficiency or profitability of an investment. It calculates the percentage return relative to the initial investment amount.

2. How Does the Calculator Work?

The calculator uses the RoR formula:

Where:

• \( RoR \) — Rate of return (decimal)
• \( A \) — Future value (currency)
• \( P \) — Principal amount (currency)

Explanation: The formula calculates the percentage gain or loss on an investment relative to the original amount invested.

3. Importance of RoR Calculation

Details: RoR is crucial for comparing investment performance, making informed financial decisions, and assessing the profitability of different investment opportunities.

4. Using the Calculator

Tips: Enter the principal investment amount and future value in currency units. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Rate of Return?
A: A good RoR depends on the investment type, risk level, and market conditions. Generally, higher returns are better, but must be considered relative to risk.

Q2: Can RoR be negative?
A: Yes, if the future value is less than the principal amount, the RoR will be negative, indicating a loss on the investment.

Q3: How is RoR different from ROI?
A: RoR and ROI are often used interchangeably, though ROI can sometimes refer to a broader concept of return calculation that may include additional factors.

Q4: Does this calculator account for time?
A: This basic RoR calculation does not factor in the time period. For annualized returns, additional calculations would be needed.

Q5: What currency should I use?
A: You can use any currency as long as both principal and future value are in the same currency unit.