ROI Calculator
Calculate the profitability of any investment. Determine your net profit, overall Return on Investment (ROI), and Annualized Return rate.
Mathematical Overview
The Standard ROI Formula
Basic ROI isolates your profit relative to the cost of the investment. It is the most universally understood metric in business and finance.
The Annualized ROI (CAGR) Formula
Because standard ROI ignores the passage of time, Annualized ROI (Compound Annual Growth Rate) calculates the smoothed, equivalent yearly return rate.
Where n is the number of years the investment was held.
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Frequently Asked Questions
What is Return on Investment (ROI)?
Return on Investment (ROI) is a popular profitability metric used to evaluate how well an investment has performed. It is expressed as a percentage and calculates the ratio of the net profit relative to the initial cost of the investment.
How is ROI calculated?
The standard formula for ROI is: ((Total Return - Investment Cost) / Investment Cost) × 100. For example, if you invest $1,000 and it grows to $1,200, your net profit is $200. ($200 / $1,000) × 100 = 20% ROI.
What is Annualized ROI?
Annualized ROI (also known as the Compound Annual Growth Rate, or CAGR) standardizes your return over a 12-month period. A 50% ROI over 5 years is much less impressive than a 50% ROI over 1 year. Annualized ROI allows you to accurately compare investments held for different lengths of time.
Can ROI be negative?
Yes. If an investment loses money (e.g., you invest $1,000 and sell it for $800), the net profit is -$200, resulting in a negative ROI of -20%.