What are the differences between ROI and other investment metrics?

What are the differences between ROI and other investment metrics?

ROI, or Return on Investment, measures the profitability of an investment. Other metrics like IRR, NPV, and payback period provide different insights. Would you like to know more about a specific metric?

Can you explain IRR and how it compares to ROI?

Sure! IRR, or Internal Rate of Return, is the discount rate that makes the NPV of an investment zero. Unlike ROI, which is a simple percentage, IRR considers the time value of money. This makes IRR more useful for long-term investments.

What about NPV? How does it relate to ROI?

NPV, or Net Present Value, calculates the difference between the present value of cash inflows and outflows over time. While ROI gives a quick snapshot of profitability, NPV provides a more comprehensive view by factoring in the time value of money.

Which metric should I use for my investment decision?

It depends on your investment goals. If you want a quick assessment, ROI is useful. For long-term projects, consider IRR or NPV for a more detailed analysis.