Return on Investment (ROI)
Investor Term:
ROI
Definition:
Return on investment (ROI) is a measure of the profitability of an investment. It is calculated by dividing the net profit from an investment by its cost. ROI is expressed as a percentage, and it can be used to compare the effectiveness or profitability of different investment choices.
Formula:
ROI = (Net Profit / Cost of Investment) * 100
Example:
For example, if an investment generates $100 in profit and the cost of the investment is $500, then the ROI would be 20%. This means that the investor would earn a 20% return on their investment.