Return on Investment (ROI): (n.) The acronym is a performance measure used to evaluate the efficiency of an investment.
To calculate ROI, the return of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio. The return on investment formula:
(Gain from Investment – Cost of Investment) ÷ Cost of Investment = ROI
ROI measures how effectively the firm uses its capital to generate profit; the higher the ROI, the better.
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