How to Calculate ROI (Return on Investment): Formula and Examples
What is ROI?
ROI (Return on Investment) measures the profitability of an investment. It compares the gain or loss from an investment relative to its cost. ROI is expressed as a percentage.
The ROI Formula
ROI = (Net Profit / Cost of Investment) x 100. For example, if you invested $1,000 and earned $1,200, your ROI = (200/1000) x 100 = 20%.
How to Use the ROI Calculator
1. Enter your initial investment amount. 2. Enter your final return amount. 3. Click Calculate. The tool shows your ROI percentage, net profit, and gain or loss.
What is a Good ROI?
A good ROI depends on the investment type. Stock market: 7-10% annually is considered good. Real estate: 8-12%. Business investments: 15-25%. Higher returns usually mean higher risk.
ROI vs Other Metrics
ROI is simple but has limitations. It does not account for time period (use CAGR for that), risk level, or opportunity cost. Use ROI alongside other metrics for complete analysis.