ROI Calculator
Return on investment %
About This Calculator
Return on Investment (ROI) measures the profitability of an investment relative to its cost, expressed as a percentage. It is the most widely used metric for comparing investment efficiency across different types of assets, projects, or business decisions.
Formula
ROI = (Net Profit / Cost of Investment) × 100%
Net Profit = Final Value − Initial Investment
Annualized ROI = ((1 + ROI/100)^(1/years) − 1) × 100%
Example Calculation
Buy shares for $2,000; sell for $2,800 after 2 years
- Net Profit = $2,800 − $2,000 = $800
- ROI = ($800 / $2,000) × 100 = 40%
- Annualized ROI = ((1.40)^(1/2) − 1) × 100 = 18.3% per year
ROI = 40%; Annualized ROI ≈ 18.3%/year
ROI vs Annualized ROI
| Total ROI | 1 Year | 2 Years | 5 Years |
|---|---|---|---|
| 10% | 10.0% | 4.9% | 1.9% |
| 25% | 25.0% | 11.8% | 4.6% |
| 50% | 50.0% | 22.5% | 8.4% |
| 100% | 100.0% | 41.4% | 14.9% |
| 200% | 200.0% | 73.2% | 24.6% |
Frequently Asked Questions
What is a good ROI?
It depends on the asset class and time horizon. The S&P 500 averages about 10% annually. Real estate typically yields 8-12%. A good ROI for a business project is often set at 15-20%+ to justify the risk over safer alternatives.
What does ROI not tell you?
ROI ignores the time period — a 40% ROI in 1 year is excellent, but over 10 years it's poor. It also ignores risk, taxes, and opportunity cost. Use annualized ROI and risk-adjusted metrics for better comparison.
What is the difference between ROI and ROE?
ROI measures return on the total investment (all capital used). ROE (Return on Equity) measures return relative to shareholders' equity (total assets minus liabilities). ROE is commonly used to evaluate company financial performance.
How does ROI apply to marketing?
Marketing ROI = (Revenue from campaign − Campaign cost) / Campaign cost × 100%. A positive marketing ROI means the campaign generated more revenue than it cost. Many businesses target a minimum marketing ROI of 5:1 (500%).