Finance
What is Return on investment (ROI)?
Return on investment (ROI) measures how much profit an investment makes relative to its cost. It's a simple percentage that lets you compare how efficiently different investments turn money into gains.
See it, don’t just read it.
Watch a 2-minute lesson with voice + animation that explains return on investment (roi).
Key things to understand
- 1ROI = (gain − cost) ÷ cost, expressed as a percentage.
- 2A higher ROI means more profit per unit of money invested.
- 3It's used to compare investments, projects, and marketing spend.
- 4Basic ROI ignores time — two equal-ROI investments differ if one took longer.
Frequently asked questions
- How do you calculate ROI?
- Subtract the cost from the gain, divide by the cost, and multiply by 100 to get a percentage.
- What is a good ROI?
- It depends on context and risk; higher is better, but compare against alternatives and the time taken.
- What's a limitation of ROI?
- Plain ROI ignores how long the investment took and the risk involved.