What is ROI (Return on Investment)?

ROI is the most intuitive and widely used return metric in business. Its simplicity makes it accessible to all stakeholders—from the C-suite to frontline managers. An ROI of 150% means you earned $1.50 for every $1.00 invested. This makes it easy to compare vastly different types of investments: a marketing campaign, a factory expansion, or an IT upgrade.

However, ROI's simplicity is also its weakness. It does not account for the time value of money—an ROI of 100% over one year is far more attractive than 100% over ten years, but basic ROI treats them the same. It also doesn't capture risk, opportunity cost, or the scale of the investment. A project with 200% ROI on a $10K investment might be less impactful than one with 50% ROI on a $10M investment.

In case interviews, ROI calculations are common for evaluating marketing spend, capital investments, and strategic initiatives. The key is defining what counts as "investment" and "return" clearly, and acknowledging the metric's limitations when relevant.