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How to calculate return on investment (ROI)?

Return on investment will indicate a company’s use of invested capital and will determine whether or not that use of capital has been deployed effectively. ROI will be calculated by dividing the company’s total net income by its average invested capital.

For example, let’s say that Catalina Heli Company generated $50 of net income on averaged invested capital of $100. You would divide $50 by $100, which gives you a ratio of 0.5, which can also be expressed as a 50% return. Not a bad ROI!

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