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Return on investment (ROI)

Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio. The return on investment formula:

ROI = (Current Value of Investment – Cost of Investment) / Cost of Investment

What do ROI and NER stand for?

ROI stands for Return on Investment. NER stands for Net Effective Rate.

Return on investment (ROI): Measures the gain or loss generated on an investment relative to the amount of money invested. ROI is usually expressed as a percentage and is typically used for personal financial decisions, to compare a company’s profitability or to compare the efficiency of different investments.

NER: When a commercial real estate landlord or broker calculates net effective rent (NER), they take the total amount of concessions, such as tenant improvements, divide it by the term of the lease and then deduct that amount from the monthly asking rent.

What is a Cash Flow Return on Investment?

A cash flow return on investment (CFROI) is a valuation metric that acts as a proxy for a company’s economic return. This return is compared to the cost of capital, or discount rate, to determine value-added potential.

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