Calculate Net Ratio For Investment

Net Ratio Formula:

\[ \text{Net Ratio} = \frac{\text{Return} - \text{Cost}}{\text{Cost}} \times 100\% \]

Net Ratio (%):

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1. What is Net Ratio?

The Net Ratio is a financial metric that calculates the percentage gain or loss on an investment relative to its original cost. It measures investment performance by expressing net profit as a percentage of the initial investment.

2. How Does the Calculator Work?

The calculator uses the Net Ratio formula:

\[ \text{Net Ratio} = \frac{\text{Return} - \text{Cost}}{\text{Cost}} \times 100\% \]

Where:

\( \text{Return} \) — Total amount received from the investment (USD)
\( \text{Cost} \) — Original investment cost (USD)
\( \text{Net Ratio} \) — Percentage gain or loss (%)

Explanation: The formula calculates the net gain (Return - Cost) as a percentage of the original cost, providing a standardized measure of investment performance.

3. Importance of Net Ratio Calculation

Details: Net Ratio is crucial for evaluating investment performance, comparing different investment opportunities, and making informed financial decisions. It helps investors understand the efficiency and profitability of their investments.

4. Using the Calculator

Tips: Enter the total return amount and original cost in USD. Both values must be positive numbers, with cost greater than zero. The calculator will compute the net ratio as a percentage.

5. Frequently Asked Questions (FAQ)

Q1: What does a positive Net Ratio indicate?
A: A positive Net Ratio indicates a profitable investment where returns exceed costs, showing percentage gain.

Q2: What does a negative Net Ratio mean?
A: A negative Net Ratio indicates a loss-making investment where costs exceed returns, showing percentage loss.

Q3: How is Net Ratio different from ROI?
A: Net Ratio is essentially the same as Return on Investment (ROI), both measuring investment performance as a percentage of cost.

Q4: What is considered a good Net Ratio?
A: A good Net Ratio depends on the investment type and market conditions, but generally, positive ratios indicate profitable investments, with higher percentages being better.

Q5: Can Net Ratio be used for comparing different investments?
A: Yes, Net Ratio provides a standardized percentage that allows for easy comparison between different investments regardless of their absolute size.