Return on Net Worth as a Percentage

In the Financial Manager, return on net worth, or investments (ROI), shows what was earned on the investment in the business during the accounting period.

The calculation for this ratio is

where:

Net Income = Sales – (Cost of Sales + Expenses)

Sales = the sum of all Income account types

Cost of Sales = the sum of all Cost of Sales account types

Expenses = the sum of all Expense account types

Owner's Equity = the sum of the following account types:

• Equity - doesn't close
• Equity - gets closed
• Equity - Retained Earnings
• Income
• Expenses
• Cost of Sales

Example

If net income is $25,000 and owner's equity is $125,000, then this ratio expressed as a percentage is 20%.

The calculation for this example is