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DO NOT TAKE MY WORD FOR ANYTHING ON THIS PAGE.
Go look it up for yourself.
Take $100 and purchase 4 hours of a mechanic's labor. Sell that same 4 hours of labor at the shop rate of $75 per hour. Gross receipt is $300. Subtract the expenses of Rent or mortgage; phone; electric; gas ($194).
$300 - $194 = $106
$106 -100 = $6
ROI = 6%
You started with $100. You invested it in labor. You've got your original $100 back plus 6% gain "derived" from labor.
Take $100 and purchase one hour of labor ($25); one circular saw ($50); and one thick large chunk of oak board ($25). Your employee works for one hour cutting up the board into wedgits door stops. You sell your entire stock of wedgits for $106.
$106 -100 = $6
ROI = 6%
You started with $100. You invested it in capital goods (the saw); labor; and raw material. You've got your original $100 back plus 6% gain "derived" from capital and labor. Your worker did not tear up your saw. You sell your saw for $25 (half of new price because it is used and depreciated.) you add this to your gross reciepts.
$106 + $25 = $131
$131 - 100 = $31
ROI = 31%
This is gain derived from capital, and labor, including a profit gained through a sale or conversion of capital assets.
In the case of making wedgits, a competitor is a corporation. You invest the $100 you have in purchasing a share of the corporate stock. The corporation's figures are exactly the same as yours were, only they are doing a larger volume of business. The corporation makes the same $106 on the original $100 just like you did. The corporation declares a dividend and sends you $6. You have just received a return on your investment of 6%. The corporation takes the other $100 and purchases two more hours of labor and two more oak boards. These sell for $212. The corporation declares a dividend and sends you $12 using the remaining $200 to purchase more labor and raw materials.
You sell your single share of stock for $200. The new owner believes he will get dividends of $12 which means he gets a 6% ROI... Just like you did. You have just sold and converted your capital asset. You received a 100% ROI because of the appreciated value of the stock. In every example the ROI is the 16th Amendment income.
Compensation for Labor ("payroll") is NOT a "return on investment".