What is a key metric in evaluating business performance?

Return on investment (ROI) is a crucial metric in evaluating business performance because it measures the profitability of an investment relative to its cost. It provides insights into how effectively a company is using its capital to generate profits, making it a vital indicator for assessing financial efficiency. A high ROI indicates that an investment is yielding a significant return, while a low ROI suggests that the capital is not being utilized effectively. This metric can help businesses make informed decisions about where to allocate resources to maximize growth and profitability.

Market share, revenue growth, and customer satisfaction scores are all important for various aspects of business evaluation, but they do not directly reflect the relationship between investments made and the profits generated from those investments. Market share provides context about a company’s competitiveness, revenue growth indicates overall sales increase, and customer satisfaction scores offer insight into customer loyalty and experience; however, they lack the direct financial perspective that ROI delivers.