Return on Investment (ROI)

byPaytm Editorial TeamOctober 16, 2025

Meaning

Understanding an investment’s effectiveness is crucial for informed decisions.

Definition

ROI (Return on Investment) is a performance metric evaluating an investment’s efficiency. It measures the benefit an investor receives relative to their initial investment cost.

Calculation

ROI is calculated as: (Net Profit / Cost of Investment) x 100. This formula expresses the return as a percentage.

Significance

ROI helps assess profitability, compare different investment opportunities, and guide better financial choices for businesses and individuals.

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