Return on Investment (ROI)
Financial Dictionary — Finance & Management
Definition
ROI measures the return generated from an investment relative to its cost.
Detailed Explanation
ROI is commonly calculated as profit divided by investment cost and is used to compare alternative projects and investment opportunities.
Common Uses
- Used in treasury and financial management for funding, investment, and risk decisions.
- Used to evaluate cash flows, financing costs, and capital structure.
- Used to evaluate cash flows, financing costs, and capital structure.
Practical Example
- Example: Finance teams use **Return on Investment (ROI)** when planning funding needs and managing cash and risk.
Why This Term Matters
- Why it matters: Supports liquidity and risk control and improves the quality of financing and investment decisions.