Return On Investment - ROI
- Return On Investment - ROI
- A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.
The return on investment formula:
In the above formula "gains from investment", refers to the proceeds obtained from selling the investment of interest. Return on investment is a very popular metric because of its versatility and simplicity. That is, if an investment does not have a positive ROI, or if there are other opportunities with a higher ROI, then the investment should be not be undertaken.
Keep in mind that the calculation for return on investment and, therefore the definition, can be modified to suit the situation -it all depends on what you include as returns and costs. The definition of the term in the broadest sense just attempts to measure the profitability of an investment and, as such, there is no one "right" calculation.
For example, a marketer may compare two different products by dividing the gross profit that each product has generated by its respective marketing expenses. A financial analyst, however, may compare the same two products using an entirely different ROI calculation, perhaps by dividing the net income of an investment by the total value of all resources that have been employed to make and sell the product.
This flexibility has a downside, as ROI calculations can be easily manipulated to suit the user's purposes, and the result can be expressed in many different ways. When using this metric, make sure you understand what inputs are being used.
Investment dictionary.
Academic.
2012.
Look at other dictionaries:
Return on Investment (RoI) — Kapitalrendite; Verhältnis des gesamten investierten Kapitals und des Umsatzes zum Gewinn: RoI ist Kennzahl zur Analyse der ⇡ Rentabilität. Sie kann als Grundlage für die Unternehmenspolitik und ⇡ Unternehmensplanung dienen. Als… … Lexikon der Economics
Return on investment (ROI) — Generally, book income as a proportion of net book value. The New York Times Financial Glossary … Financial and business terms
return on investment — ( ROI) Generally, book income as a proportion of net book value. Bloomberg Financial Dictionary the ratio of net profit after income tax, over owner s equity. Usually expressed as a percentage. Glossary of Business Terms * * * return on… … Financial and business terms
Return on Investment — [rɪ təːn ɔn ɪn vestmənt, englisch], Abkürzung ROI, Kennzahl, die eine Aussage über die Rentabilität des investierten Kapitals zulässt … Universal-Lexikon
Return of investment — Der Begriff Return on Investment (deutsch Kapitalverzinsung oder Kapitalrendite, kurz ROI) bezeichnet ein Modell zur Messung der Rendite des eingesetzten Kapitals. Der ROI beschreibt als Oberbegriff für Renditekennzahlen sowohl die… … Deutsch Wikipedia
Return on Investment — Der Begriff Return on Investment (deutsch Kapitalverzinsung, Kapitalrendite oder Anlagenrendite,[1] kurz ROI) bezeichnet ein Modell zur Messung der Rendite einer unternehmerischen Tätigkeit, gemessen am Gewinn im Verhältnis zum eingesetzten… … Deutsch Wikipedia
Return on Investment — Re|turn on In|vest|ment [ri tə:n ɔn in vɛstmənt] <aus gleichbed. engl. return on investment, eigtl. »Gewinn aus Investition«> Kennzahl, die eine Aussage über die Rentabilität des investierten Kapitals zulässt (Wirtsch.); Abk.: ROI … Das große Fremdwörterbuch
return for investment — ROI, index of profits in relation to a business investment (used to evaluate performance) … English contemporary dictionary
return on investment — ROI See: return on capital employed … Accounting dictionary
return on investment — ROI See return on capital employed … Big dictionary of business and management
