Return on Investment (ROI):

ROI is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.

ROI = Gain From Investment - Cost of Investment
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Cost of Investment

Traditionally, when IT professionals and top-management discuss the ROI of an IT investment, they were mostly thinking of “financial” benefits. Today, business leaders and technologists also consider the “non financial” benefits of IT investments.
Financial Benefits include impacts on the organization's budget and finances, e.g., cost reductions or revenue increases.
Non Financial Benefits include impacts on operations or mission performance and results, e.g., improved customer satisfaction, better information, shorter cycle-time.
In reality, most organizations use one or more “financial metrics” which they refer to individually or collectively as “ROI”. These metrics include:
Payback Period: The amount of time required for the benefits to pay back the cost of the project.
Net Present Value (NPV): The value of future benefits restated in terms of today’s money.
Internal Rate of Return (IRR): The benefits restated as an interest rate.
Return on investment is a very popular metric because of its versatility and simplicity. That is, if an investment does not have a positive ROI, or if there are other opportunities with a higher ROI, then the investment should be not be undertaken. The calculation for return on investment can be modified to suit the situation -it all depends on what is to be included as returns and costs. The term in the broadest sense just attempts to measure the profitability of an investment and, as such, there is no one "right" calculation.