Return on investment (ROI) is a financial metric used to evaluate the efficiency and profitability of an investment. It is a ratio that compares the net gain or loss generated by an investment relative to its cost. The ROI calculation is typically expressed as a percentage and is determined by dividing the net profit (revenue minus cost) by the initial investment cost, then multiplying by 100. This figure helps stakeholders understand the financial returns of different investment opportunities, enabling them to make informed decisions about where to allocate resources for the best possible financial outcomes.
Return on investment (ROI)
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