Return on investment (ROI)
The Return on Investment (ROI) is a metric utilized to assess the effectiveness or profitability of an investment or to compare the efficiency of multiple investments. Its purpose is to measure the return generated by a specific investment in relation to its cost.
To compute ROI, the benefit or return obtained from an investment is divided by its cost. The resulting value is typically presented as a percentage or ratio.
- ROI is a widely used metric for evaluating the performance of an investment.
- It is expressed as a percentage and is calculated by dividing the net profit or loss of an investment by its initial cost.
- ROI enables comparisons and ranking of investments across different projects or assets.
- However, ROI does not consider factors like the duration of holding or the passage of time, potentially overlooking opportunity costs associated with investing elsewhere.
- When assessing the ROI of something, it is essential to compare it with other available opportunities to determine its relative performance.
It is important to note that ROI has limitations, as it does not account for factors such as holding period and opportunity costs. Considering these limitations, it is advisable to evaluate ROI in conjunction with other available options to make informed investment decisions and potentially maximize returns. ROI can also be counted on individual services, such as Chargebackhit Prevent.
Written by Andrii Vovk