Return on Investment (ROI) is a financial metric used to evaluate the performance of an investment. It measures the amount of return an investor will receive on a particular investment, relative to the initial investment cost. The ROI is calculated by dividing the profit or loss generated by the investment by the initial investment cost, and then multiplying by 100 to get a percentage value.
For example, if an investor invests $100 and earns a profit of $20, the ROI would be 20%. ROI is a useful tool for evaluating the effectiveness of an investment and comparing different investment opportunities. It provides a clear indication of the return that can be expected for a given investment, which helps investors make informed decisions about where to allocate their resources.