ROI is used to measure the profitability of an investment in relation to the initial investment. ROI is a measure of the return on an investment. It is calculated by dividing the profit made by the cost of investment.

The benefits of ROI are that it helps to assess and justify a company’s investments by showing how much money is made from an investment relative to the money spent. ROI also provides a benchmark for comparing different investments and deciding which ones are most profitable.

ROI does not account for the length of the holding period or the passage of time, which means it may not account for the opportunity costs of making alternative investments.

A comparison to other available options is necessary to determine whether or not something provides a good ROI.
By calculating ROI, you can get a better sense of how your company is doing and identify areas that could be improved to help you reach your objectives.

Others Glossary