Return on investment (ROI)

Return on investment (ROI) is a financial metric used to measure the profitability of an investment relative to its initial cost. It calculates the amount of return gained by an investment in proportion to its initial investment. It is expressed as a percentage or as a ratio of the net profit earned to the initial investment. ROI is important because it allows investors to compare the profitability of different investments and determine which ones offer the highest return for their money. It also helps businesses and organizations to assess the effectiveness of their investments and identify areas for improvement. A high ROI indicates that an investment has generated substantial returns, while a low ROI may indicate that an investment has not been as profitable as expected.