What is a measure of the efficiency of an investment?

Accounting Dec 17, 2020

Expert Solution

The efficiency of an investment is measured using a calculation called ''return on investment,'' or ROI for short. ROI is calculated by taking the net profit, or increase, and dividing it by the original investment amount. Multiplying this fraction by 100 gives us the percentage ROI, which is how it is usually reported. This percentage is often called the investment yield, or how much profit an investment has yielded. Mathematically, ROI = (Net profit / original amount invested) *100.

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