Any outlay of resources should be judged by what it returns. Return on investment, or ROI, is the ratio of net gain to the cost of the investment, usually expressed as a percentage. A project that costs $100 and returns a net profit of $30 has an ROI of 30 percent. The metric is used for capital projects, marketing campaigns, training programs, and many other decisions.

ROI is attractive because it is simple and comparable across different types of investment. Its simplicity is also a limitation: it does not account for the time value of money, risk, or the scale of the investment unless additional analysis is layered on. More sophisticated measures such as net present value or internal rate of return address some of those gaps.

Despite its limitations, ROI remains a common language for evaluating whether resources were well spent. Clear definition of what counts as “return” and what counts as “investment” is essential for meaningful comparison. When used thoughtfully it focuses attention on economic outcomes rather than on activity alone.