Return on Investment(ROI) is the ratio between the net  profit and cost of investment resulting from an investmentof some resource. A high ROI means the investment's gains compare favorably to its cost. As a performance measure, ROI is used to evaluate the efficiency of an investment or to compare the efficiencies of several different investments. In purely economic terms, it is one way of relating profits to capital invested.



All the best!

Hi Chaitanya,

The following points will help you to know about ROI:

• Return on investment (ROI) measures the gain or loss generated on an investment relative to the amount of money invested. ROI is usually expressed as a percentage and is typically used for personal financial decisions, to compare a company's profitability or to compare the efficiency of different investments..
• The return on investment formula is: ROI = (Net Profit / Cost of Investment) x 100.
• Example:

The ROI calculation is flexible and can be manipulated for different uses. A company may use the calculation to compare the ROI on different potential investments , while an investor could use it to calculate a return on a stock .

For example, an investor buys $1,000 worth of stocks and sells the shares two years later for $1,200. The net profit from the investment would be $200 and the ROI would be calculated as follows:

ROI = (200 / 1,000) x 100 = 20%

The ROI in the example above would be 20%. The calculation can be altered by deducting taxes and fees to get a more accurate picture of the total ROI .

The same calculation can be used to calculate an investment made by a company. However, the calculation is more complex because there are more inputs. For example, to figure out the net profit of an investment , a company would need to track exactly how much cash went into the project and the time spent by employees working on it.

Hope this helps. All the best!!