Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
76% - Very Often

Return on Investment

Synonyms:earnings to shareholders, payment from investment, profit on vested interest, rate of return
Acronyms &
Filed Under: financial-banking, investments
Tags: accounting, finance, financial derivatives, investment, management, measurement, stock market

Definition of return on investment (ROI)

return on investment (ROI)
1. The gains or profit from an investment that is typically expressed as equity divided by cash flow.

Related Terms and Acronyms:

  • adjusted cost basis   The amount paid for an item, plus the amount paid for improvements, minus losses and depreciation. When the owner sells the item, the difference between the sales price and the adjusted cost basis is the profit or loss.
  • capital gain (CG)   The profit made by the seller when real estate or other capital assets are sold. Capital gains are taxed more favourably than earned income. However, this can be dependent on your tax bracket and the length of time you owned the asset before it was sold. You could pay approximately one-third to one-half less tax than you would pay on the same amount of earned salary.
  • capitalization   An estimate of the value of a rental or commercial property using the rate of return on investment and the property's annual net operating income.
  • income approach   A step in the valuation process of an income property. The value is reached by estimating the annual income minus an allowance for vacancies and bad debts and then subtracting annual operating expenses, real estate taxes, and insurance premiums to obtain the net operating income. This is then converted by capitalization into a capital value.
  • internal rate of return (IRR)   That rate at which the present worth of all present and future investment costs equals the present worth of all present and future investment benefits.
  • investment   Something you put your money into in order to make money.
  • investment banking (IBK)   Bank operations that manage a bank's funding position, as well as its holdings of Treasury bills, bonds and preferred and common stock.
  • return on assets (ROA)   A ratio that shows how profitable a company is when compared to its assets.
  • return on equity (ROE)   A ratio that shows how profitable a company is when compared to shareholder equity.
  • yield-to-maturity (YTM)   The internal rate of return on an investment. Typically takes into account all investment returns and their timing.

More Related Terms and Acronyms

  • capitalization rateDefinition
  • cash flow forecastDefinition
  • cost basisDefinition
  • dividendDefinition
  • guaranteed return on investment (GROI) — Acronym
  • rate of return on investment (RROI) — Acronym
  • return on existing investment (ROEI) — Acronym
  • return on gross investment (ROGI) — Acronym
  • return on incremental investment (ROII) — Acronym
  • return on internet investment (ROII) — Acronym

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