return on investment: meaning, definition, pronunciation and examples
MediumFormal/Technical
Quick answer
What does “return on investment” mean?
A financial ratio used to measure the profitability of an investment, calculated as (net profit / cost of investment) x 100%.
Audio
Pronunciation
Definition
Meaning and Definition
A financial ratio used to measure the profitability of an investment, calculated as (net profit / cost of investment) x 100%.
The quantifiable benefit, gain, or payoff (financial or otherwise) derived from committing resources (money, time, effort) to an endeavor. It is widely used as a key performance indicator in finance, business, marketing, and personal development.
Dialectal Variation
British vs American Usage
Differences
No significant difference in usage or meaning. Spelling conventions follow the usual patterns (e.g., 'analyse' vs. 'analyze' in surrounding text).
Connotations
Identical; strongly associated with corporate finance, business strategy, and performance measurement in both varieties.
Frequency
Equally common and standard in both British and American professional, financial, and business contexts.
Grammar
How to Use “return on investment” in a Sentence
The {adjective} return on investment {verb phrase} (e.g., The high return on investment justifies the cost.)To {verb} a {adjective} return on investment (e.g., to achieve a decent return on investment){Noun phrase} has a {adjective} return on investment (e.g., The campaign has a strong return on investment.)Vocabulary
Collocations
Examples
Examples of “return on investment” in a Sentence
verb
British English
- The new system needs to return a solid investment for shareholders.
- We aim to return a significant sum on our initial outlay.
American English
- This strategy should return a strong investment for our partners.
- The project is expected to return a high yield on the capital invested.
adverb
British English
- The funds were invested ROI-consciously.
- (Usage as an adverb is highly unusual and non-standard.)
American English
- The team thinks purely in ROI terms.
- (Adverbial use is virtually non-existent.)
adjective
British English
- The ROI figure was impressive.
- We conducted an ROI analysis for the proposal.
American English
- The ROI calculation is critical.
- Their ROI target is 20%.
Usage
Meaning in Context
Business
The board demanded a minimum 15% return on investment for any new capital expenditure.
Academic
The study evaluated the social return on investment (SROI) of the community health programme.
Everyday
I'm not sure the gym membership gives me a good return on investment—I only go twice a month.
Technical
The internal rate of return (IRR) is a more complex metric than a simple annualised return on investment.
Vocabulary
Synonyms of “return on investment”
Watch out
Common Mistakes When Using “return on investment”
- Using 'on' with a different preposition (e.g., 'return of investment' is incorrect).
- Confusing 'return on investment' (ratio/percentage) with 'return of investment' (getting the principal sum back).
- Incorrect pluralisation: 'returns on investments' is fine for multiple cases, but 'return on investments' for a single metric across multiple assets is also possible.
FAQ
Frequently Asked Questions
Yes, conventionally. While the raw calculation (Net Profit / Cost) gives a decimal, it is almost always multiplied by 100 and presented as a percentage (e.g., 0.25 becomes 25%).
Yes, it is commonly used metaphorically. For example, 'The return on investment for regular exercise is better health and energy.' This is an extension of the core financial meaning.
Profit is an absolute amount of money gained. ROI is a relative measure (a ratio or percentage) that shows the efficiency or yield of the investment relative to its cost. A small, cheap project can have a very high ROI with a small profit, while a large project might have a huge profit but a modest ROI.
There is no universal standard. A 'good' ROI depends on the industry, risk level, cost of capital, and alternative investment opportunities. It must be evaluated comparatively, not in isolation.
A financial ratio used to measure the profitability of an investment, calculated as (net profit / cost of investment) x 100%.
Return on investment is usually formal/technical in register.
Return on investment: in British English it is pronounced /rɪˌtɜːn ɒn ɪnˈvɛstmənt/, and in American English it is pronounced /rɪˌtɜːrn ɑːn ɪnˈvɛstmənt/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “To get a bang for your buck (informal equivalent for a high ROI)”
- “To pay dividends (metaphorical for a good long-term return)”
Learning
Memory Aids
Mnemonic
Think: 'Return' is what you get BACK, 'Investment' is what you put IN. ROI measures the relationship between the two.
Conceptual Metaphor
INVESTMENT IS A JOURNEY (with a return at the end); BUSINESS IS WAR (ROI is a key metric for victory).
Practice
Quiz
What does a 'negative return on investment' signify?