# return on investment

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Related to Rates of Return on Investment: Average rate of return

## 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.