Return on investment (ROI)

What is Return on investment (ROI)?

The proportion of net profit to total investment cost is ROI

The key measure of profit from any investment is the return on investment (ROI). It is a ratio that compares an investment’s gain or loss to its cost. It is useful in determining the current or potential return on investment, whether you are evaluating the performance of your stock portfolio, considering a business investment, or deciding whether to embark on a new project.

ROI and other cash flow measures, such as internal rate of return (IRR) and net present value (NPV), are key metrics in business analysis that are used to evaluate and rank the attractiveness of various investment alternatives.

ROI is a ratio, but it is usually expressed as a percentage rather than a ratio.