DECA Sports and Entertainment Marketing Practice Exam

What is calculated as a percentage of the money invested to assess the business's return?

1. Profit Margin

2. Return on Investment

3. Net Revenue

4. Gross Profit

The correct answer is: Return on Investment

The value being calculated as a percentage of the money invested to assess the business's return is known as Return on Investment (ROI). This financial metric is crucial for businesses as it helps evaluate the efficiency of an investment or compares the efficiency of several different investments. ROI is calculated by taking the net profit from an investment, subtracting the cost of the investment, and then dividing that figure by the cost of the investment. It is always expressed as a percentage. For example, if a business invests $1,000 and makes a profit of $200 from that investment, the ROI would be calculated as ($200 profit / $1,000 investment) x 100%, resulting in a 20% return. This metric provides insight into how well the business is leveraging its investments to generate profit. It allows for better decision-making regarding future investments by highlighting which investments are yielding beneficial returns and which are underperforming.