How do i calculate ROI?

I am an Accounting student, just need the formaula to work out Return on Investment

1. Write down the amount of your total investment, including fees and expenses, if any. For example, if you bought $950 worth of stock and your fees were $50, then your total investment is $950 + $50, or $1,000.

2. Write down the amount of profit or loss associated with your investment. If your $1,000 investment in stocks is worth $1,200 one year later, then your profit is $1,200 - $1,000, or $200.

3. Calculate the ROI by dividing the profit by the total investment: $200/$1000 = 0.20, or a 20 percent annual ROI.

The given formula is basic and OK, but you could also use time-based measures such as Payback Period, Net Present Value, or Internal Rate of Return. Payback Period measures the amount of time you would get back your investment based on your schedule of cash flows. Net Present Value measures the difference between the Present Value of your Cash flow returns and the amount of investment. The Internal Rate of Return measures the implicit rate of return when taking into account the schedule of your cash flows.

I would choose either the Net Present Value or the Internal Rate of Return over the basic ROI formula because the timing of your returns/cash flows is an important factor in evaluating a prospective investment.

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