What is ROI?

What is ROI?

• A. Rate of growth of assets
• B. Net profit divided by revenue
• C. Gross margin percentage
• D. Return on Investment, typically net profit divided by initial investment

Answer: (D)

ROI measures how effectively an investment turns cost into profit. It is typically calculated as the net profit produced by the investment divided by the initial amount invested, and is usually shown as a percentage. This makes ROI a handy tool for comparing different projects or spending choices. For example, if you invest $1,000 and earn $200 in net profit, ROI is 200/1000 = 20%. The other ideas describe different concepts: rate of growth of assets looks at asset expansion over time, net profit divided by revenue is net profit margin, and gross margin is gross profit divided by revenue.

ROI measures how effectively an investment turns cost into profit. It is typically calculated as the net profit produced by the investment divided by the initial amount invested, and is usually shown as a percentage. This makes ROI a handy tool for comparing different projects or spending choices.

For example, if you invest $1,000 and earn $200 in net profit, ROI is 200/1000 = 20%.

The other ideas describe different concepts: rate of growth of assets looks at asset expansion over time, net profit divided by revenue is net profit margin, and gross margin is gross profit divided by revenue.