The term ROI stands for “Return on Investment”. It is a financial metric that assesses an investment’s efficiency or profitability in relation to its cost. ROI is a commonly used metric in finance and business to elevate the effectiveness of projects, marketing campaigns, investments, and other initiatives. ROI is calculated as a percentage by first dividing the net gain or loss from an investment’s original cost our outlaw. The resulting number is then multiplied by 100 to obtain the final percentage.
The key elements of the formula are net gain or loss, which is the entire return on investment less the original investment cost or outlay. And the initial cost or outlay is the total cost incurred to purchase, implement, or make an investment.
A positive ROI signifies that the investment has produced a profit. A negative ROI implies a loss. A higher ROI percentage denotes a better return on investment.