ROI stands for Return on Investment. Return on Investment means how much, as a percentage, of the dollar amount that a person invests in something will that person earn as their return.
For example, if I spend or invest $1 to buy a money tree, how much money will that money tree return back to me? The answer is the ROI of that money tree.
It may already occur to you that most of the time when you try to answer this question, you have to also specify a period of time. You could ask what is the lifetime ROI of this money tree or what is the annual ROI of this money tree. The default assumption is usually for an annual ROI, although that is not always the case.
Here's an example. I buy a money tree for $1, and this money tree yields me a dime every year forever. If I plan to keep this money tree for 1 year and then sell it my neighbor for a $1 next year, then my ROI on this money tree investment is 10%. I invested $1, received $0.10 from the money tree, and resold the money tree for $1. So, my net earnings are $0.10, and $0.10 / $1 = 10%.
ROI
metrics → financial metrics
January 9th, 2022