Return on Investment (ROI)

Return on Investment (ROI) is a crucial measure employed to assess the financial performance of an investment by comparing its current value to its initial cost. This metric is presented as a percentage and is derived by subtracting the initial cost of investment from its current value, and then dividing the result by the initial cost of investment. For instance, if an investment of $100 yields a current value of $140, the ROI would be calculated as ($140 – $100) / $100, resulting in an ROI of 40%. ROI provides valuable insights into the effectiveness and profitability of an investment, enabling investors to make informed decisions based on the returns generated.