Return on investment (ROI) is a financial measure that evaluates the efficiency of an investment or the profitability of an investment relative to the cost of the investment. It is typically expressed as a percentage and is calculated by dividing the net profit (or gain) of an investment by the cost of the investment.
For example, if you invest $100 in a stock and sell it for $120, your net profit would be $20. If you divide this by the original cost of the investment ($100), you get an ROI of 20%. This means that you earned a 20% return on your investment.
ROI is a useful measure for evaluating the performance of an investment, as it allows you to compare the profitability of different investments and make informed decisions about where to allocate your resources. It is important to note, however, that ROI is only one factor to consider when evaluating the potential of an investment, and other factors such as risk, volatility, and potential for loss should also be taken into account.