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.
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.
Frequently Asked Questions
What is a good ROI?
It depends on the context. For stock markets, 7-10% annually is historically average. For marketing campaigns, 5:1 (400% ROI) is often considered strong. For real estate, 8-12% annually is common. Always compare ROI to your alternatives and risk tolerance.
How is ROI different from profit margin?
ROI measures return relative to the investment cost. Profit margin measures profit relative to revenue. A business with high profit margins might have low ROI if the initial investment was very large.
What is annualized ROI?
Annualized ROI converts a total ROI over multiple years into an equivalent annual rate. This lets you fairly compare a 2-year investment with a 5-year one. It uses the compound annual growth rate (CAGR) formula.
Can ROI be negative?
Yes. A negative ROI means the investment lost money — the total return was less than the original cost.
Is ROI Calculator free to use?
Yes, ROI Calculator is completely free with no sign-up, no login, and no hidden fees. The tool runs entirely in your browser — your data never leaves your device.