Return on Investment, commonly abbreviated as ROI, is a financial metric widely used to evaluate the probability of gaining a return from an investment. It is a versatile and straightforward indicator of the profitability of an investment, which can be applied to a range of different types of investments. ROI is calculated by dividing the net profit from an investment by the initial capital cost of the investment. The result is expressed as a percentage or a ratio. The primary purpose of ROI is to measure the efficiency of an investment or to compare the efficiencies of several different investments. In business, ROI is used to determine the return of a particular investment relative to its cost. To put it simply, ROI is the money you earn on an investment relative to the amount of money you invested. It is a clear measure that can influence financial decisions, allowing investors and business owners to assess which ventures have been successful, and which ones have not, thereby informing future investments and strategic decisions.
