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Return on investment

What is return on investment?

Return on investment (ROI) is a key performance indicator used to evaluate the efficiency or profitability of an investment. It's expressed as a percentage and is calculated by dividing the net profit from the investment by the cost of the investment.

To elaborate, ROI is a universal measure of profitability and is used across industries to compare the efficiency of different investments. For example, if a startup founder invests $100,000 in a marketing campaign that generates $150,000 in revenue, the ROI would be 50%. By calculating and comparing the ROI of various initiatives, founders can better allocate resources and prioritize investments that yield the highest returns.

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