ECONOMICS

Detailed explanation-1: -How do you calculate ROI? There are multiple methods for calculating ROI. The most common is net income divided by the total cost of the investment, or ROI = Net income / Cost of investment x 100.

Detailed explanation-2: -The average rate of return (ARR) is the average annual return (profit) from an investment. It is expressed as a percentage of the original sum invested. The ARR is calculated by dividing the average yearly profit by the cost of investment and multiplying by 100 percent.

Detailed explanation-3: -We define return on investment as adjusted operating income (operating income plus interest income, depreciation and amortization and rent from continuing operations) for the fiscal year or trailing twelve months divided by average investment during that period.

Detailed explanation-4: -ARR = (Average annual profit / Initial investment) x 100.