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Business Terms
ROI (Return on Investment)
Definition
A measure of the profitability of an investment, expressed as a percentage.
Overview
ROI compares the gain from an investment to its cost. It helps evaluate whether investments—in marketing, equipment, or services—are worthwhile.
Example
Spending $1,000 on ads that generate $3,000 in sales = 200% ROI ($2,000 gain ÷ $1,000 cost).
Best Practices
Calculate ROI for major decisions. Compare different investment options.
Common Mistakes to Avoid
Not tracking results
Ignoring time factor
Incomplete cost calculations
Frequently Asked Questions
What's a good ROI?
Depends on context. Generally, higher than alternatives and covering opportunity cost.