Term: Return on Investment (ROI)
Definition: "Return on Investment" (often abbreviated as ROI) is a financial term that measures how much profit or benefit a company earns from its investments compared to the amount it spent. It is usually expressed as a percentage. To calculate ROI, you divide the profit (or earnings) from the investment by the total amount of money invested, then multiply by 100 to get a percentage.
Usage Instructions: - Use "return on investment" when discussing finances, business decisions, or investments. - It is commonly used in corporate finance but can also apply to personal finance and other areas where money is invested.
Example: If a company invests $1,000 in a project and earns $1,200 from it, the return on investment is calculated as follows:
So the ROI for this project is 20%.
Advanced Usage: In a corporate setting, ROI is often used to compare the efficiency of several different investments. A higher ROI percentage indicates a more profitable investment. Companies may aim for a certain ROI before deciding to pursue a project or investment.
Word Variants: - ROI (abbreviation) - Return (noun): The profit earned from an investment. - Investment (noun): The act of putting money into something to earn a profit.
Different Meaning:While "return on investment" primarily refers to financial contexts, the term can also be used more generally to describe the benefits gained from any effort or action in various areas, such as time, resources, or personal projects. For example, "The return on investment of my time spent studying was evident in my improved grades."
Synonyms: - Profitability - Gain from investment - Earnings yield
Idioms and Phrasal Verbs: - "Put your money where your mouth is": This means to back up your beliefs or statements with actual investment or action. - "Cash in": To take advantage of a profitable situation or investment.
In summary, "return on investment" is a useful term for evaluating the success of an investment by comparing the profit made to the amount invested.