Finance
What Is ROI (Return on Investment)?
ROI measures the profitability of an investment as a percentage: (gain − cost) ÷ cost × 100.
Return on Investment (ROI) expresses how much an investment earned relative to what it cost: subtract the cost from the final value, divide by the cost, and multiply by 100. Buying at $1,000 and selling at $1,250 is a 25% ROI.
ROI’s weakness is that it ignores time — a 25% ROI over one year is excellent, over ten years mediocre. For time-aware comparisons, annualized return or CAGR (compound annual growth rate) is the better metric.