Short definition: Return on investment (ROI) is a financial metric used to evaluate the efficiency and profitability of an investment.
Explanation: ROI measures the gain or loss generated on an investment relative to the amount of money invested. It is expressed as a percentage and is calculated by dividing the net profit (or loss) of an investment by the initial cost of the investment.
Example: If an investment of $10,000 generates a profit of $2,000, the ROI would be 20% ($2,000 / $10,000 = 0.20).
Additional information (optional): ROI is a versatile metric that can be used to evaluate a wide range of investments, including stocks, bonds, real estate, and business projects. However, it is important to note that ROI does not take into account the time value of money or the risk associated with an investment.