Future Business Leaders of America (FBLA) Advertising Practice test

When it comes to advertising, what term refers to the amount earned from the action?

1. Return on investment (ROI)

2. Cost per click

3. Net profit

4. Gross margin

The correct answer is: Return on investment (ROI)

The term that refers to the amount earned from an action in advertising is known as Return on Investment (ROI). ROI measures the profitability of an investment relative to its cost. In the context of advertising, it evaluates the effectiveness of marketing campaigns by comparing the net profit generated to the costs associated with those campaigns. Calculating ROI provides insights into how well advertising dollars are being spent and allows businesses to assess which strategies are yielding the best financial returns. This metric is essential for determining the success of any advertising initiative, helping businesses make informed decisions about where to allocate their resources for maximum profitability. While other terms such as cost per click, net profit, and gross margin relate to financial performance, they serve different purposes. Cost per click measures the cost of each engagement with an advertisement, net profit indicates total earnings after all expenses are accounted for, and gross margin represents the difference between sales and the cost of goods sold without accounting for overhead costs.