Return on Investment (ROI)
Return on Investment (ROI) is a financial metric used to evaluate the efficiency of an investment. In the context of rental equipment, ROI helps you understand how profitable each item in your inventory is. It's calculated by dividing the net profit from the item by its total cost.
How is ROI calculated in Renterra?
ROI is calculated using the below inputs:
Purchase Price of the Item, Maintenance / Repair costs put into the machine via Internal Work Orders, and Annual Rental Income generated by the Item
If the Item has <1 year of data on it, the rental revenue will be annualized to estimate the revenue that Item is likely to generate during the year. This is the "Annualized Total"The ROI is then calculating by taking the (Rental Income - Maintenance / Repair Costs) / Purchase Price.
Interpreting ROI Values
High ROI: Indicates that the item is generating significant income compared to its cost. Low or Negative ROI: Suggests that the item is not performing as expected. Consider strategies like adjusting rental rates, increasing utilization, or even phasing out the item.