GMAT Focus EditionData InsightsMedium
A marketing manager is evaluating the performance of two advertising campaigns, Campaign X and Campaign Y, over the past month. The manager wants to determine which campaign generated a higher return on investment (ROI). The data is as follows: Campaign X: Revenue Generated = $50,000, Cost of Campaign = $10,000 Campaign Y: Revenue Generated = $75,000, Cost of Campaign = $18,000 Which campaign has a higher ROI?
- ACannot be determined from the given data.
- BBoth campaigns have the same ROI.
- CCampaign Y
- DCampaign X
Show answer & explanationAnswer & explanation
Correct answer: D. Campaign X
To calculate ROI, use the formula: ((Revenue Generated - Cost of Campaign) / Cost of Campaign) * 100%. Campaign X: (($50,000 - $10,000) / $10,000) * 100% = ($40,000 / $10,000) * 100% = 400%. Campaign Y: (($75,000 - $18,000) / $18,000) * 100% = ($57,000 / $18,000) * 100% = 316.67%. Therefore, Campaign X has a higher ROI.
Why the other options are wrong
- A. ROI can be determined from the given data.
- B. The ROIs are different, so this is incorrect.
- C. Campaign Y has an ROI of 316.67%.
Return on Investment (ROI)
ROI is a performance measure used to evaluate the efficiency or profitability of an investment or to compare the efficiency of several different investments.
- Expressed as a percentage.
- Higher ROI indicates greater profitability.
- Considers both the gain from investment and its cost.
Memory trick: ROI: Profits Over Costs, then Percent!