About This Tool
The ROI calculator measures the profitability of an investment by comparing the gain or loss relative to its cost. It's used for everything from stocks and real estate to business projects and marketing campaigns. A positive ROI means you made money; a negative one means you lost. This tool helps you evaluate which investments are worth your time and capital, and it's a standard metric in finance and business decision-making.
How It Works
ROI is calculated using the formula: ROI = (Net Profit / Cost of Investment) * 100, where Net Profit = Final Value - Cost of Investment. The result is a percentage. For example, if you invest $1,000 and sell for $1,200, your net profit is $200, and ROI is 20%. The calculator also shows the total profit in dollars for clarity.
Examples
- Buying a rental property for $200,000 and selling it 5 years later for $260,000 gives an ROI of 30% ($60,000 profit).
- Investing $10,000 in a business that returns $15,000 after 3 years yields a 50% ROI ($5,000 profit).
Pro Tips
- Include all costs—fees, taxes, maintenance, and time—in the cost of investment to get a true ROI.
- ROI doesn't account for time; compare investments with similar time horizons or use annualized ROI for fair comparison.
- Use ROI alongside other metrics like net present value (NPV) for a fuller picture of investment performance.