Simple Rate of Return Calculator Excel

Simple Rate of Return Calculator

function calculateSimpleReturn() { // Get input values using var var initialInput = document.getElementById('srorInitialVal').value; var finalInput = document.getElementById('srorFinalVal').value; var incomeInput = document.getElementById('srorIncome').value; // Clean data and parse var initialVal = parseFloat(initialInput); var finalVal = parseFloat(finalInput); var incomeVal = parseFloat(incomeInput); // Validation if (isNaN(initialVal) || isNaN(finalVal)) { alert("Please enter valid numbers for Initial and Ending values."); return; } if (isNaN(incomeVal)) { incomeVal = 0; } if (initialVal === 0) { alert("Initial Investment cannot be zero."); return; } // Calculation Logic: ((Final Value – Initial Value) + Income) / Initial Value var capitalGain = finalVal – initialVal; var totalGain = capitalGain + incomeVal; var rateOfReturnDecimal = totalGain / initialVal; var rateOfReturnPercent = rateOfReturnDecimal * 100; // Display Logic var resultBox = document.getElementById('srorResultBox'); var netProfitEl = document.getElementById('srorNetProfit'); var percentageEl = document.getElementById('srorPercentage'); resultBox.style.display = 'block'; // Formatting currency var currencyFormatter = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD', }); netProfitEl.innerText = currencyFormatter.format(totalGain); // Handle color for positive/negative if (totalGain < 0) { netProfitEl.className = 'sror-negative'; percentageEl.className = 'sror-negative'; } else { netProfitEl.className = ''; // remove negative class percentageEl.className = 'sror-highlight'; } percentageEl.innerText = rateOfReturnPercent.toFixed(2) + "%"; }

Calculating Simple Rate of Return: Excel Guide & Formula

The Simple Rate of Return is one of the most fundamental metrics in finance, allowing investors to quickly assess the profitability of an asset relative to its initial cost. Unlike complex annualized returns or IRR (Internal Rate of Return), the simple return looks at the absolute growth of your money over a specific holding period.

The Formula Used

To calculate the simple rate of return manually, you need three data points: the starting value (Cost Basis), the ending value (Current Market Value), and any cash flow generated during the holding period (Dividends, Interest, or Rent).

Rate of Return = [(Current Value – Initial Value) + Income] / Initial Value

For example, if you bought a stock for $1,000, it is now worth $1,200, and you received $50 in dividends:

• Capital Gain: $1,200 – $1,000 = $200
• Total Gain: $200 + $50 = $250
• Return: $250 / $1,000 = 0.25 or 25%

How to Create a Simple Rate of Return Calculator in Excel

While our tool above provides instant results, many investors prefer to track this in spreadsheets. Here is the step-by-step method to replicate this calculation in Microsoft Excel or Google Sheets.

Step 1: Set up your Data Columns

Create a spreadsheet with the following headers:

Cell	Header Name	Example Data
A1	Initial Investment	10000
B1	Ending Value	12500
C1	Income/Dividends	500
D1	Rate of Return	(Formula below)

Step 2: Input the Excel Formula

In cell D1, enter the following formula:

=((B1 – A1) + C1) / A1

Step 3: Format as Percentage

By default, Excel may display the result as a decimal (e.g., 0.30). To fix this:

1. Select cell D1.
2. Press CTRL + SHIFT + % (Windows) or CMD + SHIFT + % (Mac).
3. This will convert 0.30 into 30%.

When to Use Simple Return vs. CAGR

The simple rate of return is best used for:

• Short-term investments: Assets held for less than a year.
• Snapshot analysis: Quickly checking total profit regardless of time.
• Single cash flow items: Trades where you buy once and sell once without multiple contributions.

However, if you have held an investment for multiple years, the simple rate of return can be misleading because it does not account for the time value of money. For multi-year investments, you should use the Compound Annual Growth Rate (CAGR) or XIRR in Excel.

Frequently Asked Questions

Does simple rate of return include dividends?

Yes. To get an accurate picture of your investment performance (Total Return), you must include income sources like dividends, interest, or rental income in the calculation. Excluding them only gives you the "Price Return."

How do I calculate negative returns in Excel?

The formula =((Ending - Initial) + Income) / Initial works for losses as well. If your Ending Value is lower than your Initial Investment, the result will automatically be negative (e.g., -15%), indicating a loss.

What is a good simple rate of return?

A "good" return depends on the risk profile and asset class. Historically, the S&P 500 averages about 10% annually. For safer investments like bonds, 3-5% might be considered good, while high-risk venture capital might target 20%+.