Which term refers to the measure of financial return on an investment?

The term that refers to the measure of financial return on an investment is Return on Investment (ROI). This metric is used widely in finance and business to evaluate the efficiency or profitability of an investment relative to its cost. ROI is calculated by taking the gain from the investment, subtracting the cost of the investment, and then dividing this figure by the cost of the investment. The result is typically expressed as a percentage, which makes it easier to compare the profitability of different investments.

ROI is particularly useful because it allows investors and managers to assess how well their money is being utilized and to make informed decisions based on comparative performance. A higher ROI indicates greater profitability compared to other investments with lower ROI figures. This makes it a key performance indicator in evaluating the success of investment initiatives.

Other terms, while related to financial analysis, do not specifically measure the financial return on investment in the same way. Profit Margin measures what percentage of sales has turned into profits, Cost-Benefit Ratio compares the total expected costs against the total expected benefits of an investment, and Net Present Value calculates the difference between the present value of cash inflows and outflows over time. Each of these serves distinct purposes within financial analysis but does not directly convey the measure of return on an investment