Return on Investment (ROI)

A measure of profitability that calculates the return on an investment relative to its cost.

Return on Investment (ROI) is a financial metric that measures the profitability of an investment relative to its cost. It is a crucial indicator for small business owners to assess the efficiency and effectiveness of their investments. ROI is calculated by dividing the net profit generated from the investment by the initial investment cost and expressing it as a percentage. A higher ROI indicates a more favorable return on the investment. By evaluating ROI, small business owners can make informed decisions about resource allocation, prioritize investments with higher potential returns, and optimize their overall business performance.