Definition

ROI (return on investments) is an indicator used to evaluate the efficiency of an investment or cost to the profit or revenue generated by that investment. It is an essential metric in financial management and analysis.

Description

Net profit represents the income or revenue generated by an investment, less costs and expenses.

Investment cost includes all costs associated with the investment (purchase, marketing, operating, etc.).

How is ROI calculated?

ROI is calculated using the following formula:

ROI = Net Profit/Investment Cost x 100

The ROI result indicates the percentage of profit or loss the investment made relative to its cost. While a positive ROI means that the investment generated a profit, a negative ROI indicates a loss.

The formula can be used in various fields and is also important in marketing; thanks to it, you can determine which marketing activities are beneficial for your company and which should be put on hold.