Return on investment

Return on investment measures how efficiently an investment centre uses its assets. It is operating profit divided by the investment base, expressed as a percentage, and is the primary divisional performance ratio.

Also known asROI

ByHoang TruongUpdated June 30, 2026

See it move

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A multiplication tree shows return on investment of 12% at the root, decomposed by a × sign into two branches: profit margin of 15% on the left and asset turnover of 0.8× on the right. The tree presents the DuPont decomposition — 15% × 0.8 = 12% — separating ROI into a profitability driver (how much profit each euro of revenue generates) and an efficiency driver (how many euros of revenue each euro of assets generates).

Where it fits

SubjectManagerial AccountingCoreTopicDivisional Performance MeasurementCore

The formula

LaTeX

ROI = \frac{OP}{IB}

Variables

$R O I$: Return on investment (decimal (or %))
$O P$: Divisional operating profit (€)
$I B$: Investment base (total assets employed) (€)

LaTeX

ROI = \frac{OP}{Sales} \times \frac{Sales}{IB}

Variables

$P r o f i tM a r g in$: Operating profit divided by revenue (decimal)
$A sse tT u r n o v er$: Revenue divided by investment base (times)

DuPont decomposition: shows whether low ROI stems from thin margins, slow asset use, or both.