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What is ROI (return on investment)?

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Quick answer

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. ROI = (gain − cost) ÷ cost, expressed as a percentage.

Key things to understand

  1. ROI = (gain − cost) ÷ cost, expressed as a percentage.
  2. A higher ROI means more profit per unit of money invested.
  3. It's used to compare investments, projects, and marketing spend.
  4. Basic ROI ignores time — two equal-ROI investments differ if one took longer.

People also ask

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.