The return on investment is a ratio which tells us how well or not our investment is performing. The ROI is determined by dividing the net gain or profit by the investment cost expressed as a percentage.
Please don’t be scared by the formulas. It’s simple mathematics.
For example if you buy land for ugx 10m and the price goes to 15m, then the ROI is ((15 – 10)/10)*100% = 50%.
What this number tells us is that our land has appreciated by 50%. So this would make it a better investment than one with a lower ROI of say 20%. If your ROI is negative then you are losing money.
The higher the ROI, the better for a given level of risk and capital deployment.
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