What term is a performance measure used to evaluate the financial outcome of an investment?

What term is a performance measure used to evaluate the financial outcome of an investment?

• A. Return on Investment (ROI)
• B. Earnings Per Share
• C. Net Profit
• D. Gross Margin

Answer: (A)

ROI measures the profitability of an investment by comparing the net return to the amount invested, usually shown as a percentage. This directly reflects the financial outcome of putting resources into something and makes it easy to compare different opportunities on a like-for-like basis. For example, investing $10,000 and earning $2,000 in net profit yields a 20% ROI. That focus on return relative to cost is why this is the best answer. Earnings per share looks at profit per share of stock, which is useful for stock performance but not the overall investment outcome. Net profit shows the dollar amount of profit but doesn’t relate it to the investment size. Gross margin measures efficiency of producing goods, not the return on an investment.

ROI measures the profitability of an investment by comparing the net return to the amount invested, usually shown as a percentage. This directly reflects the financial outcome of putting resources into something and makes it easy to compare different opportunities on a like-for-like basis. For example, investing $10,000 and earning $2,000 in net profit yields a 20% ROI. That focus on return relative to cost is why this is the best answer. Earnings per share looks at profit per share of stock, which is useful for stock performance but not the overall investment outcome. Net profit shows the dollar amount of profit but doesn’t relate it to the investment size. Gross margin measures efficiency of producing goods, not the return on an investment.