ROI Calculator

Calculate Return on Investment from your investment cost and total gain or revenue. See ROI percentage, net profit, and annualized return. Perfect for evaluating business investments, marketing campaigns, and projects.

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How ROI Is Calculated

Return on Investment (ROI) is the most widely used profitability metric in business. It measures how much profit or loss an investment generates relative to its cost. A positive ROI means the investment earned more than it cost; a negative ROI means it lost money. ROI is expressed as a percentage, making it easy to compare different investments regardless of their size.

ROI Formulas

ROI = ((Gain from Investment − Cost of Investment) / Cost of Investment) × 100

ROI = (Net Profit / Cost of Investment) × 100

Annualized ROI = ((1 + ROI/100)^(1/years) − 1) × 100

  • Gain = Total revenue or value received from the investment
  • Cost = Total amount invested
  • Net Profit = Gain − Cost
  • Annualized ROI = Normalizes ROI to a per-year basis for fair comparison

Example Calculations

Example 1: Marketing Campaign

Spent $5,000 on ads, generated $18,000 in revenue

  • Net Profit: $18,000 − $5,000 = $13,000
  • ROI: ($13,000 / $5,000) × 100 = 260%

Example 2: Real Estate Investment

Bought property for $200,000, sold for $260,000 after 3 years

  • ROI: ($60,000 / $200,000) × 100 = 30%
  • Annualized: (1.30^(1/3) − 1) × 100 = 9.14% per year

Why Annualized ROI Matters

A 50% ROI over 5 years is very different from 50% ROI over 1 year. Annualized ROI normalizes returns to a per-year basis so you can fairly compare investments with different time horizons. This is especially important when deciding between a short-term project with modest returns versus a long-term investment with higher total returns.

Limitations of ROI

ROI does not account for the time value of money, risk, opportunity cost, or cash flow timing. Two investments with the same ROI may have very different risk profiles. For more comprehensive analysis, consider using Net Present Value (NPV) or Internal Rate of Return (IRR) in addition to ROI.