Return on Investment (ROI)
Return on investment (ROI) is the most common performance measure used to evaluate the efficiency or profitability of an investment.
It is calculated by dividing the net profit from the investment by the initial cost of the investment, then multiplying by 100 to get a percentage.
ROI helps investors and businesses determine the financial returns of their investments, allowing for better decision-making and resource allocation.
Related terms
Frequently asked questions
Why is ROI important?
ROI is important because it provides a straightforward metric to compare the profitability and efficiency of different investments.
What is a good ROI?
A good ROI varies by industry and investment type, but generally, a higher ROI indicates a more profitable investment.
What factors can affect ROI?
Factors that can affect ROI include market conditions, competition, operational efficiency, and changes in costs or revenues.
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