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What is return on investment?

Return on investment is a metric that investors often use to evaluate the profitability of an investment or to compare returns across a number of investments. It is expressed as a percentage.

What is a return on investment (ri)?

ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio .

Why is return on investment important?

Return on investment helps investors to determine which investment opportunities are most preferable or attractive. For example, let us consider Investment A and Investment B, each with a cost of $100. These two investments are risk-free (cash flows are guaranteed) and the cash flows are $500 for Investment A and $400 for Investment B next year.

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