Return on Investment (ROI)

What is Return on Investment (ROI)?

Return on Investment (ROI) is a financial metric that is widely used to measure the likelihood of gaining a return from an investment. It is a ratio that compares the gain or loss from an investment relative to its cost, enabling investors to evaluate the efficiency or profitability of various investments.

Short Description: A performance measure used to evaluate the efficiency or profitability of an investment compared to its cost.

• Calculation: The formula is ROI = (Net Profit / Cost of Investment) x 100%.
• Profitability Indicator: Helps investors assess the potential returns of investment opportunities.
• Versatility: Can be used across various investment types, from stocks to business projects.
• Decision-making Tool: Assists in comparing different investment opportunities, choosing those with the highest ROI to maximize gains.

ROI provides a snapshot of profitability, making it a crucial tool for effective financial decision-making and strategic planning.