MentisCell – ROI (Return on Investment)
Summary
ROI (Return on Investment) is a financial metric used to evaluate the profitability of an investment relative to its cost. It measures the efficiency of an investment by comparing the net gain or loss to the initial expenditure, expressed as a percentage.
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Content
Return on Investment (ROI) is one of the most widely used performance indicators in business and finance.
It provides a straightforward way to assess whether an investment generates sufficient value compared to its cost.
Main functions
- Profitability measurement: determine whether an investment yields positive returns.
- Decision support: compare different investment opportunities.
- Resource allocation: guide capital deployment toward higher-yield projects.
- Performance tracking: monitor ongoing initiatives for efficiency.
- Communication: provide stakeholders with a clear financial metric.
Formula
Where:
- Net Profit = Total Gains – Total Costs
- Investment Cost = Initial expenditure
Examples
- Investing $100,000 in a project that generates $130,000 in returns:
- Marketing campaign costing $50,000 that generates $75,000 in new revenue: ROI = 50%.
- IT infrastructure upgrade costing $200,000 that saves $250,000 in operational costs: ROI = 25%.
Essence
- Measures financial efficiency of investments.
- Expressed as a percentage for easy comparison.
- Simple, widely understood, and versatile.
- Focused on monetary outcomes, unlike ROO (Return on Objectives).
Interconnections
- ROO — ROI focuses on financial return, while ROO measures achievement of strategic objectives.
- KPI — ROI can be tracked as a KPI for investment performance.
- OKR — ROI may serve as a key result for financial objectives.
- BIA — ROI can be used to justify continuity investments identified in impact analyses.
Tags
#roi #investment #finance #profitability #measurement #strategy
Contributors
Created with the support of Microsoft Copilot on 2025-11-10.
Validation and editorial direction by Jorge Godoy.