ROI Meaning: Definition, Examples, and Translations
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ROI
[ˌɑːr.oʊˈaɪ ]
Definition
Context #1 | Noun
business
ROI (Return on Investment) is a financial metric used to evaluate the profitability of an investment. It measures the gain or loss generated on an investment relative to the amount of money invested.
Examples of usage
- Calculating the ROI helps investors determine the success of their investments.
- A high ROI indicates a profitable investment, while a low ROI may suggest a loss.
Translations
To see the translation, please select a language from the options available.
Interesting Facts
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.
Origin of 'ROI'
Main points about word origin
- 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.
The term ROI originated in the financial sector and has become widely used in business and investment contexts. It is a key measure for assessing the performance and efficiency of investments. The concept of ROI dates back to the early 20th century and has since evolved to be a fundamental metric in financial analysis.