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What is ROI?

A popular metric, ROI is used as a crude indicator of the profitability of an investment. ROI, in essence, is adaptable and simple which is what makes it so favored.

The calculation is not overly complex and relatively simple to interpret. 

If the ROI on investment is net positive, it is most likely profitable. However, if there are other chances with higher ROIs available, these signals can assist investors in eliminating or selecting the best options. 

Similarly, investors should clear negative ROIs, which indicate a net loss.

Heres how to calculate the return on investment:

​ROI = (Current Value of Investment – Cost of Investment) / Cost of Investment

 The “Current Value of Investment” refers to the proceeds from the sale of the investment of interest. Because ROI is calculated as a percentage, it can be easily compared to returns from other investments, allowing one to evaluate various investment kinds.


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