Finance guide
What Is ROI?
ROI, or Return on Investment, is one of the simplest and most widely used metrics for evaluating how profitable an investment is relative to its cost.
ROI formula
ROI = (Gain - Cost) / Cost
ROI is usually expressed as a percentage. A higher ROI means a more profitable investment relative to its cost.
Why ROI is useful
- Simple and easy to understand
- Quick comparison between investments
- Widely used across industries
Limitations of ROI
- Does not account for time
- Ignores risk and volatility
- Can be misleading for long-term investments
ROI vs other metrics
ROI is often compared with CAGR and payback period. Each measures different aspects of an investment.
Use our ROI calculator
When should you use ROI?
- Short-term investment comparisons
- Quick profitability checks
- Early-stage decision making