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

What it is

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).

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.