Ratio

• ROI is a commonly used ratio that measures the returns generated by a particular amount of invested money, based on business liabilities. For example, if you invest $100,000 to buy cooking equipment for a new restaurant that generates $40,000 after one year, the ROI is 40 percent (40,000 divided by 100,000 times 100).
  
  

Significance

• ROI is significant because investors can gauge how efficiently capital is used. A high ROI indicates that capital is being used efficiently. Investment capital can be an equity stake in a business venture or equipment used to operate a business.
  
  

Uses

• ROI is used in small and large business settings. Corporate ROI ratios take into account income, stock and debt to calculate how successfully capital is used. Similarly, small businesses can use ROI to compare income against taxes, debts and other liabilities.