Learn in the textbookBusiness Analysis Metrics
DefinitionReturn on investment (投資利益率, ROI) is a profitability indicator that expresses the profit earned on the capital invested as profit ÷ invested capital × 100 (%).
ExplanationThe higher the value, the more profit is earned from less capital. Using equity as the denominator gives ROE (return on equity) and using total assets gives ROA (return on assets), and all of them are returns on capital. A return on capital breaks down into "profit ÷ sales" times "sales ÷ capital", where the former is the profit-to-sales ratio and the latter is the capital turnover ratio.
AnalogyIt works like the interest rate on a deposit: it shows by what percentage the original money grew.
Memory hookThe E in ROE stands for Equity and the A in ROA for Assets. The last letter of the abbreviation tells you the denominator.