Return on Investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment, or to compare the efficiency of multiple investments. It calculates the amount of return on a specific investment relative to its cost, expressed as a percentage or ratio.
ROI is calculated by dividing the net profit or loss from an investment by its initial cost. While it is a straightforward and universally used metric, ROI has limitations such as not accounting for the time value of money and risk.
ROI and Return on Assets (ROA) are both critical in assessing investment efficiency but focus on different aspects:
To enhance ROI, consider the following strategies:
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