Sales Dictionary
Return on Investment (ROI)
Definition
A performance measure used to evaluate the efficiency or profitability of an investment.
Deep Dive
Return on Investment (ROI) is a fundamental performance measure used to evaluate the efficiency or profitability of an investment. It quantifies the financial gain or loss from an investment relative to its cost, expressed as a percentage or ratio. ROI is a versatile metric applicable across various business contexts, from assessing the profitability of a marketing campaign to evaluating the financial viability of a new equipment purchase or an entire business venture. It provides a clear, comparable figure that helps decision-makers understand the financial impact of their choices.
Examples & Use Cases
- 1Calculating the ROI of a new digital marketing campaign by comparing the revenue generated to the campaign's cost
- 2Assessing the ROI of upgrading manufacturing equipment by weighing increased production efficiency and reduced maintenance against the purchase price
- 3An investor evaluating the ROI of purchasing shares in a company by comparing the capital gain and dividends received against the initial investment
Related Terms
ProfitabilityCost-Benefit AnalysisKey Performance Indicator (KPI)