Return on Investment (ROI)

Return on Investment (ROI) is a key financial metric measuring the profitability of an investment relative to its cost, calculated as
. Expressed as a percentage, it helps investors and businesses quickly evaluate, compare, and prioritize investments, such as stocks, marketing campaigns, or equipment.

Key Aspects of ROI:
Formula:

Interpretation: A positive percentage indicates profit, while a negative percentage indicates a loss.
Limitations: It does not account for the time value of money, meaning it may not accurately compare projects with different timeframes.
Applications: It is widely used to assess the effectiveness of marketing spend, real estate purchases, and company investments.