Return on Investment (ROI)

A performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.

What is Return on Investment (ROI)?

Return on investment (ROI) is a financial metric used to evaluate the profitability of an investment. It measures the return generated on an investment relative to its cost. ROI is typically expressed as a percentage, calculated by dividing the net profit from the investment by the initial cost of the investment and multiplying the result by 100. A higher ROI indicates that an investment is more profitable, while a lower ROI suggests lower profitability. ROI is a critical tool for assessing the performance and efficiency of investments, helping investors make informed decisions about where to allocate their resources. By comparing the ROI of different investment options, individuals and businesses can prioritize their investments based on potential returns. Additionally, ROI can be used to track the success of projects or initiatives over time, providing valuable insights into the effectiveness of various strategies. Ultimately, monitoring ROI allows investors to better understand the impact of their investments and optimize their financial decisions to achieve their goals.