Return on investment

Return on investment (ROI)

Generally, book income as a proportion of net book value.

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return on investment (ROI)

A measure of the net income a firm's management is able to earn with the its total assets. Return on investment is calculated by dividing net profits after taxes by total assets. Also called rate of return, return on assets. Compare profitability ratio.

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Return on investment. Your return on investment (ROI) is the profit you make on the sale of a security or other asset divided by the amount of your investment, expressed as an annual percentage rate.

For example, if you invested $5,000 and the investment was worth $7,500 after two years, your annual return on investment would be 25%. To get that result, you divide the $2,500 gain by your $5,000 investment, and then divide the 50% gain by 2.

Return on investment includes all the income you earn on the investment as well as any profit that results from selling the investment. It can be negative as well as positive if the sale price plus any income is lower than the purchase price.