Which financial metric indicates the efficiency of an investment?

Return on investment (ROI) is the financial metric that indicates the efficiency of an investment. It measures the amount of return on an investment relative to the cost of the investment. By calculating ROI, investors and businesses can assess how well an investment is performing by comparing the gains or losses generated relative to the initial investment made. A higher ROI indicates that the investment is more efficient at generating profits relative to its cost.

In contrast, gross profit margin measures the difference between sales and the cost of goods sold, expressed as a percentage of sales; while it provides insight into a company's profitability, it does not specifically address the efficiency of an investment itself. Operating cash flow reflects the cash generated from operating activities but does not directly evaluate the return on individual investments. Net asset value is a calculation used primarily in mutual funds to represent the total value of assets minus total liabilities, which does not provide a clear measure of investment efficiency. Therefore, ROI stands out as the most relevant metric for evaluating the effectiveness of an investment.