How reasonable is the return on investment?

When investors choose investment projects, they are most concerned about risks and expected returns. Obtaining reasonable profits and expected returns is the value of investment activities, and the return on investment is one of the indicators to measure the economic benefits of investment products. So how reasonable is the return on investment?

1, how to calculate the return on investment?

When investors need to examine the operating ability of an enterprise, they usually judge it by the return on investment. The calculation formula of return on investment is: return on investment = (annual profit or average annual profit/total investment) 100%.

Take real estate investment as an example. Suppose you buy a house with a square meter of 100 at a price of 100 million yuan, and then rent it out at a price of 4,000 yuan per month, and the property management company charges 160 yuan every month, then the return rate of this property investment is: [(4000- 160) * 65438+.

2. What is the reasonable return on investment?

As can be seen from the formula, under the condition of constant total investment, the return on investment is directly proportional to the profit of the enterprise, so it can be simply understood that the higher the return on investment, the stronger the profitability of the enterprise. If the return on investment is 0, it means that the enterprise has no profit.

The return on investment in different industries is different, mostly between 5% and 20%. Generally speaking, the higher the return on investment, the better, but in fact, the return on investment is also related to the investment time. For the same investment amount, the longer the investment time, the higher the return on investment should be.

Return on investment is usually time-sensitive. For example, the return on investment of 5% in the past year does not mean that it will be 5% in the next year. Therefore, paying too much attention to the return on investment may ignore the long-term value of the enterprise.

The above content about how reasonable the return on investment is, I hope it will help everyone. Warm reminder, financial management is risky and investment needs to be cautious.