# return on investment (ROI)

Return on investment (ROI) is a measure of the profitability of an investment; for the amortization of investment costs. The return on investment says something about the return on capital generated, about the return on invested capital in a given period. The return on investment can be used to determine the profit per unit of capital invested.

An ROI analysis can be carried out in three ways depending on the requirements: Calculating the payback period, looking at the value of a project in terms of cash flows, the Net Present Value (NPV), and the internal rate of return of a project, the Internal Rate of Return (IRR). In practice, the payback period is usually used.

The ROI system originates from America and was developed in the 1920s. In Germany, the ZVEI (German Electrical and ElectronicManufacturers'Association) has further developed

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into a key figure system. Since the return on investment is becoming increasingly important in all investment-related areas of IT technology, the return on total investment can be determined from these key figures. The calculation of profitability is based on the turnover rate of the capital employed and the return on sales.