what is roi

ROI stands for Return on Investment, which is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of several investments. It is a ratio between net income and investment, and a high ROI means that the investments gains compare favorably to its cost. ROI is calculated by dividing the benefit (or return) of an investment by the cost of the investment, and the result is expressed as a percentage or a ratio. ROI is used to evaluate the efficiency of an investment or to compare the efficiencies of several different investments, and it is one way of relating profits to capital invested. ROI is a popular metric because of its versatility and simplicity, and it can be used to measure profit or loss on a current investment or to evaluate the potential profit or loss of an investment that you are considering making. However, ROI does not take into account the holding period or passage of time, and so it can miss opportunity costs of investing elsewhere.