why is roi a useful measurement 
roi is a popular metric because of its versatility and simplicity essentially roi can be used as a rudimentary gauge of an investment s profitability this could be the roi on a stock investment the roi a company expects on expanding a factory or the roi generated in a real estate transaction the calculation itself is not too complicated and it is relatively easy to interpret for its wide range of applications if an investment s roi is net positive it is probably worthwhile but if other opportunities with higher rois are available these signals can help investors eliminate or select the best options likewise investors should avoid negative rois which imply a net loss for example suppose jo invested 1 000 in slice pizza corp in 2017 and sold the shares for a total of 1 200 one year later to calculate the return on this investment divide the net profits 1 200 1 000 200 by the investment cost 1 000 for an roi of 200 1 000 or 20 with this information one could compare the investment in slice pizza with any other projects suppose jo also invested 2 000 in big sale stores inc in 2014 and sold the shares for a total of 2 800 in 2017 the roi on jo s holdings in big sale would be 800 2 000 or 40 