When a business finishes a project, they want to know how successful it was in generating revenue. One way to determine a project's success is to perform a return on investment analysis. A return on investment (ROI) analysis shows how much revenue a project generated, compared to how much the project cost. Companies want to have a higher ROI on projects, because then the project generated more revenue relative to its cost to implement.

## Step 1.

Determine the cost of the project and the revenues from the project for the period management wishes to analyze. For example, a firm wants to start a new widget plant. The cost of the plant is \$100,000. After 2 years, the firm estimates the project generated \$150,000 in revenues.

## Step 2.

Subtract the cost of the project from the gain from the project. In our example, \$150,000 minus \$100,000 equals \$50,000.

## Step 3.

Divide the number calculated in Step 2 by the cost of the project to determine ROI. In our example, \$50,000 divided by \$100,000 equals a ROI of 0.5.