return on investment financial definition of return on investment. return on investment finance term by the Free Online Dictionary.

Return on investment (ROI)

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

Return on Investment

The money that a person or company earns as a percentage of the total value of his/her/its assets that are invested. It is calculated thusly:

Return on investment = (Income - Cost) / Cost

Because it is easy to calculate the return on investment, it is a relatively popular measure of the profitability on an investment and can help in making investment decisions.

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.

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.

return on investment (ROI)

A generic term to define a number of analytical tools for measuring the financial benefits of an investment, including cash-on-cash, internal rate of return, equity dividend,and financial management rate of return.

Return on Investment (ROI)

What Does Return on Investment Mean?

A performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. To calculate ROI, the return on an investment is divided by the cost of the investment, as shown here; the result is expressed as a percentage or a ratio. Return on investment is a popular metric because it is versatile and simple to use. If an investment does not have a positive ROI or if there are alternative investment opportunities with a higher ROI, the investment should not be undertaken.

Investopedia explains Return on Investment

One should keep in mind that the ROI calculation can be modified to suit the situation, depending on how an investment's returns and costs are calculated. In the broader sense, ROI is used to measure the profitability of an investment and there really is no “right” calculation. For example, a marketer may compare two different products by dividing the revenue that each product has generated by its costs. A financial analyst, however, may compare the same two products by using an entirely different ROI calculation, perhaps by dividing the net income of an investment by the total value of all resources that have been employed to make and sell the product. As can be seen, this can cause problems as ROI calculations can be manipulated to suit the user's purposes. In using ROI, one must be sure to know the inputs that are being applied.

Related Terms:
• Compounding
• Return on Equity—ROE
• Return on Investment Capital—ROIC
• Return on Net Assets—RONA
• Total Return

Mentioned in	?		References in periodicals archive	?		Financial browser	?		Full browser	?
Absolute Return Actuarial Cost Assumptions Actuarial Cost Method Bogey Dividend Yield Expected return on investment Low-Income Housing Tax Credit low-income housing tax credits Profitability Ratio Profitability Ratios rate of return rate of return of investment Required Rate of Return Retorno sobre la inversion Retorno sobre o investimento Return on Assets Return on Investment Capital Risk-Free Rate of Return ROI	Using numbers is critical when trying to show the return on investment that you represent for a prospective employer at the executive level. Executives Are You Worth the Investment? by Heather Eagar / Jobs and Careers community When it comes to home remodeling, the kitchen is often times the first place homeowners will look to make improvements It is one of the most important rooms in the house and it also has a very large return on investment if you are looking to sell the house in he near future When it comes to home remodeling, the kitchen is often times the first place homeowners will look to make improvements. Satin Nickel Offers Great Cabinet Hardware Designs by Amanda Bashore / Home based business community Return on Investment (ROI) or Rate of Return (ROR) means that if you go to college and pay a lot of money, you? Understand and Improve Direct Mail ROI with 6 Smart Marketing Tips by Mark Etinger / Consumer news, advice, product reviews community	Retorno esperado Retorno libre de riesgo Retorno nominal Retorno sobre la inversion Retorno sobre las ventas Retorno sobre o investimento Retorno superior al mercado Retorno total Retracao do credito Retracement Retractable Bond retreatment bond Retribuzione annua garantita retrospective appraisal Return Return If Exercised Return of Capital Return of Capital Distribution Return on Assets Return on Capital Employed Return on Capital Gains Return on Common Equity Return on Common Stock Equity return on equity Return on Gross Invested Capital return on investment Return on Investment Capital Return on Net Assets Return On Revenue Return on Sales Return on Total Assets Return-to-maturity expectations Returned Without Action Reu Reuters Revaluation revaluation clause revaluation lease revaluation or reevaluation Revaluo Revenu des investissements Revenu disponible Revenu du capital dividends Revenu gagne Revenu national brut Revenu ne provenant pas du travail revenue Revenue Agent Revenue Agent's Report Revenue Anticipation Note Revenue Bond	Return On Debt Return on Economic Capital Return On Economic Equity Return on Education Investment Return on Energy Investment Return on equity Return on equity Return on equity Return on equity Return on equity Return on equity Return on Existing Investment Return on Expectation Return on Experience Return on Floorspace Return on Funds Employed Return on Gross Fixed Assets Return on Gross Invested Capital Return on Gross Invested Capital Return on Gross Investment Return on Incremental Invested Capital Return on Industrial Insurance Return on Innovation Investment Return on Integrity Return on Internet Investment Return on invested capital Return on invested capital Return on invested capital Return on invested capital Return on Invested Tangible Capital return on investment Return On Investment Capital Return On Investment Capital Return On Investment Capital Return On Investment Capital Return On Investment Corp Return on Investment Reporting Return On It Return On Keyword Investment Return On Life Return on Listener Involvement return on managed capital Return On Management Return on Marketing Return on marketing investment Return on Maximum Drawdown Return on Net Asset Value Return on net assets Return on net assets Return On Net Assets Before Interest and Taxes Return on Net Assets Employed Return on Net Capital Employed Return On Net Investment Return on Net Operating Assets Return On Net Trade Assets Return on net worth Return on net worth Return On New Invested Capital Return on Non Operational Assets Return on Objective

Mentioned in

References in periodicals archive

Financial browser

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Absolute Return
Actuarial Cost Assumptions
Actuarial Cost Method
Bogey
Dividend Yield
Expected return on investment
Low-Income Housing Tax Credit
low-income housing tax credits
Profitability Ratio
Profitability Ratios
rate of return
rate of return of investment
Required Rate of Return
Retorno sobre la inversion
Retorno sobre o investimento
Return on Assets
Return on Investment Capital
Risk-Free Rate of Return
ROI

Using numbers is critical when trying to show the return on investment that you represent for a prospective employer at the executive level.

Executives Are You Worth the Investment? by Heather Eagar / Jobs and Careers community

When it comes to home remodeling, the kitchen is often times the first place homeowners will look to make improvements It is one of the most important rooms in the house and it also has a very large return on investment if you are looking to sell the house in he near future When it comes to home remodeling, the kitchen is often times the first place homeowners will look to make improvements.

Satin Nickel Offers Great Cabinet Hardware Designs by Amanda Bashore / Home based business community

Return on Investment (ROI) or Rate of Return (ROR) means that if you go to college and pay a lot of money, you?

Understand and Improve Direct Mail ROI with 6 Smart Marketing Tips by Mark Etinger / Consumer news, advice, product reviews community

Retorno esperado

Retorno libre de riesgo

Retorno nominal

Retorno sobre la inversion

Retorno sobre las ventas

Retorno sobre o investimento

Retorno superior al mercado

Retorno total

Retracao do credito