ROI Calculator

Measure your investment efficiency. Calculate net profit, total percentage return, and annualized growth (CAGR) to compare different opportunities.

Investment Data

Total ROI (Profitability)
50.00%
Net Profit $5,000.00
Annualized ROI 22.47%
Investment Multiple 1.5x
Invested
Profit

How to Use ROI to Measure Success

Return on Investment (ROI) is the most popular profitability ratio used to evaluate the efficiency of an investment. Simply put, it measures the amount of return on an investment, relative to the investment’s cost.

1. Net Profit vs. Percentage

While knowing you made $5,000 is great, it doesn't tell the whole story. An ROI of 50% on a $10,000 investment is much more efficient than an ROI of 5% on a $100,000 investment, even if the dollar profit is identical.

2. The Role of Time (Annualized ROI)

Time is the silent factor in returns. A 50% ROI over 2 years is excellent, but 50% over 20 years is poor. This calculator provides the Annualized ROI, allowing you to compare short-term flips with long-term holdings accurately.

Common ROI Applications:

  • Marketing (ROMI): Measuring revenue generated per dollar spent on ads.
  • Real Estate: Analyzing profit from property flips or rental income.
  • Stock Market: Tracking portfolio growth over specific timeframes.
  • Business Equipment: Deciding if new machinery pays for itself via production.

Return on Investment FAQ

What is the basic ROI formula?
The standard formula is: ((Gain - Cost) / Cost) * 100%.
How does Annualized ROI differ from total ROI?
Total ROI looks at absolute growth. Annualized ROI (CAGR) tells you the average return per year, accounting for time.
What is a good ROI for a business?
A "good" ROI varies. For marketing, a 500% (5:1) ratio is often targeted. In stocks, 7-10% annually is a common benchmark.
Does ROI account for taxes and fees?
Calculations are usually Gross. To find "Net ROI," you must subtract fees and taxes from your total return first.
What are the limitations of using ROI?
ROI doesn't account for risk or liquidity—how easily you can turn that investment back into cash.
What is an Investment Multiple?
The Investment Multiple (MOIC) is the total return divided by the total investment. E.g., turning $1k into $3k is a 3.0x multiple.
Why is ROI better than Net Profit for comparisons?
ROI is relative. It shows efficiency. A smaller profit from a tiny investment can be much "better" than a large profit from a massive expenditure.
How do I factor inflation into ROI?
Subtract the inflation rate from your Annualized ROI to get the Real ROI, which shows actual purchasing power growth.