Definition
Return on investment (ROI) is a ratio that expresses how much a given outlay earned back, usually computed as net gain divided by cost and quoted as a percentage. It measures the efficiency of an investment rather than its size.
How it works
ROI is deliberately flexible in scope: it can be applied to a single ad campaign, a piece of equipment, or an entire project or company, which means comparisons across contexts require a consistent definition of gains and costs. The result can be positive or negative — a negative ROI means the outlay lost money.
Usage
Marketing budget reviews, project approvals and procurement decisions all use ROI to compare the cost-effectiveness of different options. In everyday business talk, “is the ROI worth it” has become shorthand for asking whether something is worth doing.
Related and confusable terms
ROI measures efficiency while ARR measures scale; the two often appear together but answer different questions. In startup discussions ROI also sits next to PMF and VC, which respectively address demand, funding and returns.