What is ROI?


Quick Answer

ROI stands for "return on investment" and is a measure of profitability used to evaluate a business. ROI is determined by dividing net profit by total assets. It is used to compare the profitability of several investments side by side to determine which has the greatest return.

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Full Answer

If the net profit is $100,000 and total assets are $400,000, the ROI is 25 percent. Keep in mind that ROI calculations can be done in a number of ways and therefore can be manipulated to suit the user's purposes. There is no one absolutely correct calculation for ROI. ROI is also not necessarily the same thing as profit.

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