What is the purpose of the Return on Investment formula?

The purpose of the Return on Investment (ROI) formula is to evaluate the financial benefits of an investment. This financial metric helps organizations measure the profitability of an investment relative to its cost, allowing decision-makers to analyze whether the investment has produced a worthwhile return. By calculating ROI, healthcare executives can determine the effectiveness of expenditures on new technologies, staff training, or other institutional resources. This evaluation is key in strategic planning and resource allocation within healthcare facilities, ensuring that financial resources are used wisely to enhance service delivery and patient outcomes. Understanding the financial implications of investments assists in justifying budgets and making informed decisions that align with the organization's financial goals.