Return on investment (ROI) is a profitability metric that relates the benefit of an investment to its cost.
Calculation. Net benefit divided by cost, expressed as a percentage. A positive value means the investment returns more than it costs.
ROI (%)=Benefit − CostCost× 100
In procurement. Benefits include realised savings, cost avoidance and lower process cost; costs include licences, implementation and internal effort.
Limits. ROI captures monetary effects only and says nothing about when an investment pays for itself. It is only as robust as the underlying savings baseline.
Synonyms: Return on Investment