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Return on Investment (ROI)

A financial metric used to evaluate the profitability or efficiency of an investment. ROI is calculated by dividing the net profit or gain from the investment by the initial cost of the investment, and then multiplying by 100 to express it as a percentage. ROI helps assess the effectiveness of an investment or business decision by comparing the returns generated to the amount invested.

Related Terms

Annual Contract Value (ACV)

Annual Contract Value (ACV) measures yearly revenue from a customer contract in subscription models. It helps businesses with financial planning, sales forecasting, and performance analysis.

Annual Recurring Revenue (ARR)

Annual Recurring Revenue (ARR) quantifies predictable yearly revenue from subscriptions. It excludes one-time fees, helping businesses assess financial health, growth, and stability for strategic planning and benchmarking.

Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) measures the total expense of gaining a new customer, including marketing and sales costs. It helps assess acquisition efficiency and ROI by dividing costs by new customers.

Customer Churn (Churn Rate)

Churn rate measures the percentage of customers who leave a business over time. It's key for retention and growth, calculated as lost customers divided by starting customers, then multiplied by 100.

Customer Lifetime Value (CLV)

Customer Lifetime Value (CLV) estimates total revenue from a customer over their relationship. It guides acquisition and retention strategies, calculated as purchase value × frequency × customer lifespan.
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