Term Definition: return on investment (ROI) |
Main Description
The ratio of money gained or lost on an investment relative to the amount expended on that investment. In the broadest sense, ROI attempts to characterize the profitability or financial efficiency of a potential investment by concentrating on how much profit or cost savings would be realized for a given use of capital. ROI is a very popular metric because of its versatility and simplicity. Normally, if an investment does not have a positive ROI, or if there are other investments that have a higher ROI, then that investment should not be chosen based on strictly financial reasons.
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