How to Use
- Enter investment cost
Input the total amount invested.
- Enter returns
Input the total return or current value of the investment.
- View results
See the ROI percentage and net profit amount.
What is ROI (Return on Investment)?
ROI (Return on Investment) is the most fundamental profitability metric, expressing how much net profit you earned relative to the amount invested, as a percentage. It applies to almost any decision where costs and returns are clear, including real estate, stocks, marketing campaigns, startups, and equipment purchases.
Why use ROI
The key advantage is that it lets you compare investments of very different sizes on the same scale. An investment of 10,000,000 that earns 2,000,000 and one of 100,000,000 that earns 15,000,000 look bigger in absolute terms for the latter, but as ROI they come out to 20% and 15% respectively, revealing that the former is more efficient.
- Used alongside ROAS (revenue per unit of ad spend) to measure marketing performance
- Used as a benchmark when prioritizing among several investment options
However, ROI does not reflect the investment period, so when comparing investments held for different lengths of time you should also look at the annualized return.
Calculation Formula
ROI is found by dividing net profit by investment cost and multiplying by 100 to get a percentage.
ROI (%) = (Total Return − Investment Cost) ÷ Investment Cost × 100
Worked example
If you invest 5,000,000 and recover 6,500,000:
- Net profit = 6,500,000 − 5,000,000 = 1,500,000
- ROI = 1,500,000 ÷ 5,000,000 × 100 = 30%
Here, total return is the entire amount finally recovered from the investment (present value, including principal), and investment cost is the principal put in at the start. When net profit is zero you break even; when it is negative you are at a loss.