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Return on Investment
Business
WHAT IS IT?
Return on Investment is a way of comparing the return generated by an investment with the amount invested.
IN PLAIN ENGLISH
It asks what you got back compared with what you put in.
SIMPLE EXAMPLE
Spend £1,000 on a project and generate an additional £1,500 of return: the result depends on the exact ROI definition and costs included, so the calculation should be stated clearly.
WHY DOES IT MATTER
ROI can help compare scenarios, but it should be used carefully because timing, risk and the definition of return can change the result.
THE ROCKET TEST
ROI compares what an investment produces with what it costs, using a clearly defined calculation.
SEE IT IN ACTION
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