Calculate Return
Investment Breakdown
What is ROI (Return on Investment)?
Return on Investment (ROI) is a universal financial metric used to evaluate the efficiency and profitability of an investment. It measures the amount of return on a particular investment relative to the investment's cost.
Because ROI is expressed as a percentage, it allows business owners, marketers, and investors to easily compare the effectiveness of completely different investments. For example, you can use ROI to compare the profitability of buying a rental property versus running a digital marketing campaign, even though the amounts of money involved are vastly different.
How to Calculate ROI
Formula: ((Return - Cost) ÷ Cost) × 100
To calculate ROI manually, you first need to determine the Net Profit by subtracting the initial cost of the investment from the final amount returned. Then, you divide that net profit by the initial cost and multiply by 100 to get a percentage.
Step-by-Step Example: You spend $1,000 on advertising, which generates $2,500 in sales.
1. Find the Net Profit: 2500 - 1000 = $1,500
2. Divide Profit by Cost: 1500 ÷ 1000 = 1.50
3. Multiply by 100: 1.50 × 100 = 150% ROI
8 Quick ROI Calculation Examples
See exactly how the ROI formula works for common investment scenarios.
Double Your Money
Cost $1,000 → Return $2,000
= 100% ROI
50% Profit
Cost $100 → Return $150
= 50% ROI
Break Even
Cost $500 → Return $500
= 0% ROI
Partial Loss
Cost $200 → Return $150
= -25% ROI
Total Loss
Cost $1,000 → Return $0
= -100% ROI
Triple Your Money
Cost $5,000 → Return $15,000
= 200% ROI
Minor Gain
Cost $10,000 → Return $10,500
= 5% ROI
10x Return (Tenbagger)
Cost $1,000 → Return $10,000
= 900% ROI
ROI vs. CAGR: What's the Difference?
While ROI tells you the total growth of an investment from start to finish, it completely ignores the element of time.
A 100% ROI sounds fantastic. But a 100% ROI achieved over 1 year is vastly superior to a 100% ROI achieved over 20 years. If you need to measure the smoothed annualized growth of an investment over multiple years, you should use our CAGR Calculator instead.
Common Applications for ROI
Where calculating the Return on Investment is most crucial.
Marketing Campaigns (ROAS)
Digital marketers calculate the Return on Ad Spend to determine if a Facebook or Google ad campaign is generating more revenue than it costs to run.
Stock & Crypto Investing
Investors use ROI to measure the total percentage gain or loss of a specific stock purchase or their entire portfolio over time.
Real Estate Flipping
House flippers calculate ROI by comparing the final sale price of a home against the combined total of the original purchase price plus all renovation costs. To calculate the exact retail markup on those flips, try our Markup Percentage Calculator.
Business Equipment Purchases
Companies evaluate capital expenditures (like buying a new manufacturing machine) by estimating the ROI it will generate through increased production efficiency.
Frequently Asked Questions
1. What is a "good" ROI?
A "good" ROI is highly subjective and depends on the industry and risk tolerance. In the stock market, an annualized historical ROI of 7% to 10% is standard. However, a small business running a new marketing campaign might target a 400% to 500% ROI to ensure strong profitability.
2. Can ROI be negative?
Yes. If the total amount returned is less than the amount you initially invested, your net profit is negative, resulting in a negative ROI percentage. This clearly indicates a financial loss. To figure out the exact gain needed to bounce back from this loss, check out our Percentage Recovery Calculator.
3. What does a 100% ROI mean?
A 100% ROI means that your net profit exactly equals your initial investment cost. In simpler terms, you doubled your money.
4. How do I calculate ROI in Excel?
If cell A1 is your Investment Cost, and cell B1 is your Total Return, use the formula: =(B1-A1)/A1. Make sure to format the resulting cell as a percentage to display the correct ROI.