ROI Calculator Formula
Understand the math behind the roi calculator. Each variable explained with a worked example.
Formulas Used
Net Gain/Loss
gain = final_value - initial_investmentROI
roi = initial_investment > 0 ? (final_value - initial_investment) / initial_investment * 100 : 0Variables
| Variable | Description | Default |
|---|---|---|
initial_investment | Amount Invested(USD) | 10000 |
final_value | Final Value(USD) | 14000 |
How It Works
ROI Formula
ROI = (Final Value - Initial Investment) / Initial Investment × 100%
A positive ROI means you gained money; negative means you lost money. ROI is one of the most widely used profitability metrics because it is simple to calculate and easy to compare across different investment types. However, it does not account for the time period of the investment, so a 40% ROI over ten years is very different from 40% over one year. For time-adjusted comparisons, use the CAGR calculator instead.
Worked Example
You invested $10,000 and it is now worth $14,000.
- 01Net gain = $14,000 - $10,000 = $4,000
- 02ROI = $4,000 / $10,000 × 100% = 40%
Frequently Asked Questions
What is a good ROI?
It depends on the investment type and timeframe. The stock market averages ~10% annually. Real estate averages 8-12%. A good ROI beats inflation (3-4%).
How is ROI different from profit margin?
ROI measures the return relative to the total amount invested, while profit margin measures profit relative to revenue. A business can have a high profit margin but a low ROI if it required a very large upfront investment to generate those sales.
Can ROI be negative?
Yes, a negative ROI means you lost money on the investment. For example, if you invested $10,000 and the final value is $8,000, your ROI is -20%. This is useful for quantifying the size of a loss, not just that a loss occurred.
Learn More
Guide
How to Calculate ROI (Return on Investment)
Learn how to calculate ROI for investments, business projects, and real estate. Covers the basic ROI formula, annualized returns, CAGR, and common pitfalls in ROI analysis.
Ready to run the numbers?
Open ROI Calculator