Return on Investment (ROI) Calculator
What is 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 efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, in relation to the investment's cost.
To calculate ROI, you subtract the cost of the investment from the total returns generated by that investment, and then divide the net profit by the cost of the investment. The result is usually expressed as a percentage.
Formula: ROI = ((Total Returns – Investment Cost) / Investment Cost) * 100%
A positive ROI indicates that the investment generated profit, while a negative ROI indicates a loss.
Example Calculation:
If you invested $10,000 (Investment Cost) in a project and it generated $15,000 in revenue (Total Returns) over its lifetime, your ROI would be:
ROI = (($15,000 – $10,000) / $10,000) * 100%
ROI = ($5,000 / $10,000) * 100%
ROI = 0.5 * 100%
ROI = 50%
This means your investment yielded a 50% profit relative to its initial cost.