What Is ROI?
Return on Investment (ROI) is a financial metric used to measure the profitability of an investment. It is calculated by dividing the net gain or loss from an investment by its initial cost, and then expressing it as a percentage. ROI can be used to compare different investments in order to determine which one will yield the highest return for a given amount of money invested. For example, if you invest $100 into two different stocks and one yields a 10% return while the other yields 20%, then you would choose the stock with higher ROI since it has yielded more profit relative to its initial cost.
ROI can also be used when evaluating business decisions such as marketing campaigns or product launches. By calculating how much revenue was generated compared to how much was spent on advertising or development costs, businesses are able to make informed decisions about where their resources should be allocated in order maximize profits over time. Additionally, investors often use ROI when deciding whether they should purchase shares of a company’s stock; if they believe that there is potential for high returns based on past performance and current market conditions, they may decide that investing in that particular company is worth their risk-taking capital.