Return on Investment Calculator
Result
Understanding Return on Investment (ROI)
Return on Investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiencies of several different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment's cost.
How to Calculate ROI
To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio. The formula for calculating ROI is:
ROI = ((Current Value – Initial Cost) / Initial Cost) × 100
For example, if you invested 1,000 units and the final value of that investment is 1,200 units, your net profit is 200. Dividing 200 by 1,000 gives an ROI of 20%.
Why is ROI Important?
ROI is a versatile metric that can be used to gauge the profitability of almost any type of expenditure. Businesses use it to determine which projects to pursue, while individual investors use it to assess the performance of their portfolios. A positive ROI indicates that the investment has gained value, while a negative ROI indicates a loss.