Return on Investment (ROI)
Return on Investment (ROI) is a financial metric used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. It is calculated by dividing the net profit of an investment by the initial cost of the investment, and then multiplying that result by 100 to get a percentage.
For example, if you invest $1,000 in a project and it generates a net profit of $200, the ROI would be calculated as follows: ($200 / $1,000) x 100 = 20%. This means that for every dollar invested, you are getting a return of 20 cents.
ROI is an important tool for investors to measure the success of their investments and make informed decisions about where to allocate their resources. It can also be used by businesses to evaluate the profitability of various projects or initiatives.
Overall, ROI is a key metric in finance that helps to determine the profitability and efficiency of an investment.
Examples of ROI
- Investing in stocks and receiving dividends
- Launching a marketing campaign and tracking sales increase
- Upgrading equipment in a business and measuring productivity gains
For more information on Return on Investment, you can visit the Wikipedia page.