ROI: meaning, definitions and examples

Etymology

• The term 'return on investment' dates back to the 17th century, first used in financial documents to evaluate profits.
• ROI gained popularity as businesses started focusing more on measurable profits in the late 20th century.

Business

• Companies often use ROI to decide if a project is worth pursuing by comparing potential profits to costs.
• A standard ROI formula is (Net Profit / Cost of Investment) x 100, which helps express returns as a percentage.

Technology

• In tech, ROI is crucial for measuring the effectiveness of software or infrastructure investments, ensuring businesses stay competitive.
• Tools and analytics platforms are increasingly being utilized to calculate ROI for digital marketing campaigns.

Pop Culture

• Movies that depict financial themes, like 'The Wolf of Wall Street', often reference ROI to showcase the high stakes of investment.
• Television shows focusing on startups also highlight ROI to illustrate their growth strategies and funding rounds.

Psychology

• Understanding ROI can help reduce fear of financial decisions, as it encourages an analytical approach to spending and investing.
• People often experience cognitive biases when evaluating ROI, focusing too much on potential gains without considering risks.