Return on Investment (ROI)
Candlefocus EditorROI is a simple calculation that considers how much money has been invested in a particular asset or project, and how much profit has been earned as a result of this investment. It is typically expressed as a percentage, as it shows a direct relation between the profit earned and the cost of investment. It is calculated by finding the difference between the return on an investment and its initial cost, and then dividing that by the initial cost. Therefore, if an investment costs $100 and the resulting return is $150, the ROI is 50%.
ROI is a helpful metric for gauging the success or potential profitability of investments; however, it can be misleading when taken in isolation. It does not take into account the length of time the investment was held for or the potential for investing elsewhere. To be most effective at gauging investment performance, it should be used with other metrics and compared to other available opportunities rather than taken on its own.
Overall, Return on Investment (ROI) is an important metric used to evaluate the financial performance of investments. It provides a basic calculation of the difference between a return and the cost of an investment, expressed as a percentage. It is an effective tool for comparing the performance of investments, but should not be used in isolation. For most accurate results, ROI should be used with other metrics and compared to other available opportunities.