Return on Investment

Return on Investment (ROI) is an essential financial metric used to gauge the profitability of investments relative to their costs.

Expressed as a percentage and calculated by dividing net profit from an investment by its initial cost, then multiplying by 100; positive ROI signifies profit generated while negative indicates loss incurred from an investment. ROI measures can be used as a way of gauging the effectiveness and efficiency of various investments such as marketing campaigns, business initiatives and capital projects and helps companies prioritize those with greater potential of producing positive returns in terms of resource allocation decisions.