In finance, what does ROI stand for?

The correct answer is Return on Investment. ROI is a widely used financial metric that helps assess the profitability of an investment relative to its cost. It is expressed as a percentage and is calculated by taking the net profit from the investment, dividing it by the initial cost of the investment, and then multiplying by 100.

Understanding ROI is crucial for making informed business decisions, as it evaluates the efficiency of an investment and allows comparing the profitability of various investments. A higher ROI indicates a more profitable investment, which is essential for contractors when deciding where to allocate resources or which projects to pursue.

The other options do not accurately capture the correct definition of ROI. Rate of Investment might imply a metric related to how fast investments are growing but lacks specificity regarding returns. Residual on Investment suggests a focus on leftover returns rather than the overall profitability measure that ROI represents. Return on Interest, while it seems similar, conflates two distinct concepts and does not exist as a recognized financial metric. Thus, B, Return on Investment, is the precise term used in financial contexts.