Return on Investment
Return on Investment (ROI) is also often referred to as a Rate of Return (ROR) or Rate of Profit (ROP). These terms are all used to describe the money that you earn in relation to an investment that you have made. So, in basic terms if you open a savings account with a bank or building society then the money you earn in interest on your savings will represent your Return on Investment.
Return on Investment is usually measured by a percentage. The concern here is not how much money you make in an investment, business or enterprise but how much you make relative to the money you have invested in the first place. So, for example, a profit of £50 on a £500 investment (10%) has a lower Return on Investment than a profit of £40 on a £200 investment (20%) even though the sum returned is higher in basic terms.
In the business world Return on Investment can also be measured in other ways rather than just in money. So, for example, if a business invests a certain amount of money in a marketing campaign to bring in new sales leads then a Return on Investment calculation can be done on the sales leads that the campaign brings in as well as on a pure monetary basis.