Companies use ROI, or Return on Investment, as a fundamental performance metric to assess the profitability of an investment or business initiative. Companies frequently use it to evaluate the efficacy and success of marketing campaigns. ROI is the net gain or loss relative to investment cost, expressed as a percentage or ratio.
The formula for ROI is: ROI = (Net Profit / Cost of Investment) * 100
A positive ROI indicates that the investment produced a profit, whereas a negative ROI indicates a loss. Businesses use ROI to make smart decisions and manage resources.