Return on Investment (ROI)

Return on investment (ROI) is a business indicator that provides information on the profitability of an investment, among other things.

What is the definition of Return on Investment (ROI)?

Simply explained, ROI shows when and how a company's investments pay off. The ratio is measured as a percentage of the capital invested and the profit generated. ROI can be used to assess investments and the performance of a branch of business or even the entire company. 

General information

ROI helps to evaluate the success of a company and provides information on how useful an investment actually was. The return on investment is also an important key figure for online marketing, for example, as the success of marketing campaigns is regularly analyzed in this area. However, the result is only significant if it can be separated again into return on sales and capital turnover. Then it is possible to determine exact causes for changes in an ROI. If, for example, profit has increased while sales remain the same, the return on sales will also increase. If the same high ROI is to be achieved, the capital turnover must consequently decrease. The ratio of the capital invested and the profit generated provide information about the return on investment. 

ROI formula for calculation  

The following formula is used to calculate ROI:

ROI = (Profit/Sales) * (Sales/Invested Capital) * 100% = Return on Sales * Capital Turnover * 100%.


A company promotes one of its new products with a post on all social networks. It spends €2,000 on this. Several customers are acquired through the post, therefore a profit of €17,000 can be attributed to the advertised post. In the case of this example, this results in a return on investment of 8.5%. Consequently, the individual investment has contributed significantly to the financial success.  

At what point is an ROI considered "good"?

As of what percentage a return on investment is good can only be roughly defined. An ROI that lies between 7-10% is a good value for a company with a stable business development. For companies with higher investments and more risks, an ROI of 15-25% should be able to be proven. So there is no exact value that defines a good ROI. Rather, the ROI value depends on various factors of an individual company.

Other forms of return on investment

Since there are numerous variations for calculating success within an entire company, there are also return on investment ratios such as return on equity (ROE) or return on assets (ROA) in addition to ROI.

Return on Equity (ROE)

ROE puts a company's profit in relation to its capital, but this formula cannot be used to determine the company's total revenue. ROE is calculated by dividing profit by a company's equity.

Return on Assets (ROA)

ROA also indicates how profitably the capital employed has contributed to the overall profit. Unlike ROE, the type of financing does not play a role here. In simple terms, ROA is used to calculate how many euros of profit a company has generated with each euro of capital and can be used to weigh up how the result has turned out for the company.

History of the Return on Investment

The development of the ratio ROI is due to the former engineer of the company Du Pont de Numerours, Donaldson Brown. Within the proven Du Pont scheme, he defined return on investment as the key performance indicator. With Du-Pont's scheme, a great many correlations can be derived. Not only capital turnover and return on sales influence ROI, but also many other key figures. For example, if the return on investment is to be increased, the total capital can be reduced, which increases the capital turnover and thus also the return on investment.  

Advantages of the ROI 

  • The return on investment is independent of the size of the company, thus a comparison between different types/and sizes of companies can be made.
  • Simple, concise presentation
  • Meaningful result in the shortest time

Disadvantages of the ROI

  • Information is often lost.
  • The return on investment only provides monetary information.
  • Not suitable as the only instrument for decision making 

Noch mehr Wissen in unseren REMIRA Whitepapern

In unseren Whitepapern erhalten Sie nützliche Praxistipps rund um die Themen Supply Chain und Omnichannel Commerce.

Integriertes Sales & Operations Planning Bild

Integrated Sales & Operations Planning

Our whitepaper "Integrated Sales & Operations Planning" shows you how to use the strategic approach of S&OP to network sales, production, and purchasing planning and other corporate areas, and how to use a coordinated process to create a valid database for making business decisions quickly.
Out-of-Stocks vermeiden - Verfügbarkeit erhöhen Bild

Avoid Out-of-Stock - Increase Availability

The REMIRA white paper "Avoide Out-of-Stocks - Increase Availability" shows why inventory management is an important competitive factor, how digital inventory management can be introduced during ongoing operations, and why it quickly provides significant savings.
Die optimale Supply Chain für den Ersatzteilhandel Bild

The Optimal Supply Chain for the Spare Parts Trade

The REMIRA white paper "The optimal supply chain for retailers" shows the challenges for dealers in the aftermarket and provides assistance for optimizing the supply chain. It also shows the most important aspects you need to consider as a spare parts dealer and how you can always determine the optimal demand and ensure high availability with the help of artificial intelligence.
Lagerverwaltung für Logistikdienstleister Bild

Warehouse Management for Logistics Service Providers

In our whitepaper "Warehouse Management for Logistics Service Providers", we explain how you can easily manage complex warehouse processes, which systems are used in logistics and give you practical help in selecting a warehouse management system.
Leitfaden Lieferantenintegration Bild

Supplier Integration Guide

Our whitepaper "Supplier Integration Guide" shows the opportunities and benefits of digital procurement. You will get practical assistance on the way to digitizing your procurement and learn which processes you can already digitize today without much effort. We also show you how you can also integrate smaller suppliers into the processes - with or without an EDI project.
Einfach Inventur: Der Inventurleitfaden Bild

Easy Stocktaking: The Stocktaking Guide

Our whitepaper "Easy Stocktaking: The Stocktaking Guide" presents all legally permitted alternatives to full inventory and shows you how you can significantly reduce your inventory effort. In addition, you will learn how to determine your optimization potential and how sample stocktaking can be easily carried out in the cloud.
Vendor Managed Inventory: Vorteile für Händler und Lieferanten Bild

Vendor Managed Inventory: Advantages for Retailers and Suppliers

Our white paper "Vendor Managed Inventory: Advantages for retailers and suppliers" shows why vendor-managed inventory management is an important competitive factor, what potential suitable software solutions offer, and how the introduction of appropriate software works.
S&OP in der Lebensmittelbranche Bild

S&OP in the Food Industry

Our whitepaper "S&OP in the Food Industry" shows you how to combine and optimize your planning and decision-making processes in a unified process, gives you an insight into Sales & Operations Planning and demonstrates the benefits of using Sales & Operations Planning - with a focus on the food industry.