In financial terms, what does ROI stand for?

ROI stands for Return on Investment, which is a key financial metric used to evaluate the profitability of an investment. It measures the gain or loss generated relative to the amount of money invested. To calculate ROI, the net profit from the investment is divided by the initial cost of the investment, and the result is often expressed as a percentage.

This metric is crucial for businesses as it helps them assess which investments yield the best returns and make informed decisions about where to allocate resources in the future. Understanding ROI can also aid in comparing different investments, determining the effectiveness of expenditures, and justifying projects to stakeholders.

Other terms listed, such as Rate of Interest, Return on Income, and Revenue Operation Increase, do not accurately define ROI, emphasizing the importance of grasping the correct terminology in financial discussions.