Return on Investment Calculator
Calculate your ROI to measure the efficiency of your investments. Make informed decisions by analyzing your investment returns accurately.
Note: Enter your investment data below to calculate your ROI. Monetary values should be entered as numbers without currency symbols. The calculator uses the formula: ROI = (Net Profit / Cost of Investment) × 100%.
Understanding Return on Investment (ROI)
Return on Investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or to compare the efficiency of different investments. It directly measures the amount of return on a particular investment relative to the investment's cost.
Simple ROI Formula
The basic formula for calculating ROI is:
ROI = (Net Profit / Cost of Investment) × 100%
Where:
Net Profit = Total Returns - Total Investment
Total Returns = Final Value + Additional Returns
Total Investment = Initial Investment + Additional Costs
Annualized ROI Formula
For investments held over different time periods, it's often useful to calculate an annualized ROI:
Annualized ROI = ((1 + Simple ROI/100)^(1/Time Period) - 1) × 100%
This formula converts the total ROI over the entire investment period to an equivalent annual rate.
Components Explained:
- Initial Investment: The amount of money initially invested in the project, asset, or venture.
- Additional Costs: Any other costs associated with the investment, such as maintenance, fees, or upgrades.
- Final Value: The current or final market value of the investment.
- Additional Returns: Any income generated from the investment besides its growth in value, such as dividends, rental income, or interest.
- Time Period: The duration of the investment, typically measured in years, used for calculating annualized ROI.
Interpreting ROI Results
- Positive ROI (>0%): The investment has generated a profit.
- Negative ROI (<0%): The investment has resulted in a loss.
- Higher ROI: Generally indicates a more efficient investment, though it's important to consider risk and time factors.
Remember that ROI doesn't account for risk or the time value of money by itself. For more comprehensive investment analysis, consider using additional metrics like NPV (Net Present Value), IRR (Internal Rate of Return), or Payback Period.