What is the definition of Return on Investment, or ROI?

Return on Investment, or ROI, is an indicator of the profitability of an investment relative to the amount invested. The calculation for ROI is:

• ( Final Value of Investment - Cost of Investment ) / Cost of Investment

Return on Investment is used to assess the profitability of investment for different potential investments. If a project has a lower ROI than another project, then it should be disregarded in favour of the other.