What is the formula used to calculate ROI?

The formula for calculating Return on Investment (ROI) is centered on the relationship between net profit and the cost of the investment. Specifically, ROI is expressed as a percentage that indicates how much return is gained for every dollar invested.

Using the correct formula, the ROI is determined by taking the net profit—which is derived from total revenue minus total costs—dividing it by the cost of the investment, and then multiplying the result by 100 to obtain a percentage. This measure helps investors understand the efficiency of an investment and compare it with other investment opportunities.

In essence, option B accurately captures the relationship needed to assess an investment's performance, where net profit reflects the actual gains after all expenses are considered, thereby providing a clearer picture of profitability in relation to the investment made. Other formulas presented do not appropriately represent this fundamental financial ratio and may lead to confusion about actual investment performance.