ROI, which stands for “Return on Investment.” ROI is a financial metric used to measure the profitability of an investment by comparing the amount of return generated with the amount of investment made. It is typically expressed as a percentage or ratio.
The formula for calculating ROI is as follows:
ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
In other words, ROI measures how much profit or loss an investment has generated relative to its cost. A high ROI means that the investment has generated a significant return relative to the amount invested, while a low ROI suggests that the investment has not been very profitable.
ROI is an important metric for businesses to track, as it helps them evaluate the effectiveness of their investments and make informed decisions about future investments. It can be used to compare the performance of different investments and identify areas where improvements can be made to maximize returns.