I am kind of puzzled as various sources give either of those formulas to calculate ROI:
- Cost of Benefits /Cost of Investments
- (Gains - Investment) / Investment
The obvious problem that if I invest 1000 EUR and gained 1000 EUR, the first formula will yield ROI=100% while the second ROI=0%.
To me, the latter seems more natural as the investment did not bring anything, just paid for itself. But how people understand that, which way is more common?
A real life example: Test automation. Initial investment is high, about 18 000 USD. In the first release, it only brings modest saving (12 320 USD). The first formula gives ROI=68,5%, the second then ROI= -31,5%,