Return on Investment (ROI) is a financial metric that measures the efficiency and profitability of an investment.
It is the return generated by an investment relative to the cost of the investment. In other words, it is the amount of money gained or lost on an investment compared to the original cost of the investment. The ROI is calculated by dividing the net gain from the investment by the original investment cost and then multiplying by 100 to express the result as a percentage.
ROI is a valuable tool for evaluating the performance of an investment, as it provides a simple way to compare the return generated by different assets. For example, an investor may compare the ROI of two different stocks or investment funds to determine which is generating a better return on their investment.
Investors use ROI to determine whether an investment is worth pursuing, and also as a benchmark for determining the efficiency and profitability of their portfolio as a whole. It is important to note that ROI is just one of many factors to consider when evaluating an investment, and it should be used in conjunction with other financial metrics and analysis techniques to make informed investment decisions.