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Return On Investment (ROI)

February 12, 2023

Return on Investment (ROI) is a financial metric that measures the efficiency of an investment. It is calculated by dividing the net profit of an investment by the cost of the investment and then multiplying by 100 to express the result as a percentage.

ROI helps investors and businesses determine the profitability of an investment and compare the performance of different investments. A higher ROI indicates that an asset is generating a higher return level than its cost. In comparison, a lower ROI means the investment is not generating enough return relative to its price.

The formula for calculating ROI is:

For example, if an investment costs $100 and generates a net profit of $120, the ROI would be 20% (120 / 100 * 100). This means that for every $1 invested, the investor is generating $0.20 in profit.

ROI is a valuable metric for evaluating different investments’ performance and making informed decisions about future investments. However, it’s essential to remember that ROI is just one factor when considering an investment. Other factors, such as market trends, economic conditions, and personal goals, also play a role in making investment decisions.

Also, See: Cost Per Click

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