What Does Return on Investment Mean

Posted by Grace under Personal Finance on August 22, 2015

Want to know what does return on investment mean? What is ROI? ROI means Return on Investment. But what is the exact definition of ROI when it comes to investing and accounting. In investing, the rate of return on investment is very important. If an investment offer has a good ROI, many investors will get attracted to it.

In a company business, their accountants report the ROI by simply knowing the total assets and net profits. By calculating the total gross income, the total expenses of the company and the total amount of profits.

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Related: What’s a Good Investment Return Rate?

What Does Return on Investment Mean

The return on investment simply means the “benefit that an investors could get in a specified investment offers”. If an investor will invest $300,00 in stocks and make a profit of $100,000 that means he make a profit more than 33% of his total invested capital. But, you should be aware that a profit and ROI is different.

what does return on investment mean

ROI Definition | Photo Credit: John Liu CC 2.0

In simple idea using the example above, your $300,000 investment capital will turned into $400,000. There are many ways to determine the rate of return of an investment offers.Whether you are investing in paper assets, business ownership or real estate, make sure you are making a good ROI or else, you are just wasting your money. Put your money into risk, therefore your money deserves a good return.

Related: How to Calculate Rare of Return on Investment – learn how to calculate ROI return on investment in an easiest way plus a tips on where to download a ROI calculator and spreadsheets.

Perfect Meaning of ROI

  1. Return on investment (ROI) is the benefit to the investor resulting from an investment of some resource. A high ROI means the investmentgains compare favorably to investment cost.1
  2. A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of differentinvestments. ROI measures the amount of return on an investment relative to theinvestment’s cost.2

References: 1 Wikipedia ,2 Investopedia

Now, you know what is ROI all about. If you want to add some meaning and definition of the word “return on investment:, please do share it with us. We will be happy to hear your thoughts and opinions.

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