Return on Investment, or ROI, is one of the most important financial metrics for evaluating the profitability of an investment. It represents the percentage ratio between the profit earned and the capital invested. A positive ROI indicates a gain, while a negative ROI signals a loss. This metric is used across virtually all industries—from finance and marketing to real estate valuation.
ROI enables investors, businesses, and individuals to compare different investment opportunities and make informed decisions. Whether you're investing in stocks, real estate, marketing campaigns, or new business equipment, ROI helps you objectively assess the potential return.
Using our ROI calculator is straightforward:
After entering both values, the calculator automatically computes your ROI as a percentage.
The mathematical formula for calculating Return on Investment is:
ROI = ((Return − Investment) / Investment) × 100
Alternatively expressed:
ROI = (Profit / Investment) × 100
The profit is calculated as the difference between the return and the original investment.
Suppose you invest $10,000 in company stocks. After one year, you sell the stocks for $12,500 and received an additional $200 in dividends. Your total return is therefore $12,700.
Calculation:
Investment: $10,000
Return: $12,700
Profit: $12,700 − $10,000 = $2,700
ROI: ($2,700 / $10,000) × 100 = 27%
An ROI of 27% means you earned 27 cents of profit for every dollar invested.
A "good" ROI varies by industry and risk tolerance. Generally, an ROI above 10% for conservative investments like real estate is considered very good. For riskier investments like stocks or startups, ROIs of 15-25% or more are often expected. It's important to always consider ROI in the context of risk and time frame.
ROI doesn't account for the time factor or the risk of an investment. A 50% return over 10 years is less attractive than 20% over 1 year. Additionally, opportunity costs and the time value of money are not included. For a complete analysis, you should also consider metrics like IRR (Internal Rate of Return) or Net Present Value.
ROAS (Return on Advertising Spend) specifically relates to advertising expenses and measures revenue per advertising dollar spent. ROI, on the other hand, is a more general metric that looks at net profit relative to total investment. ROAS is primarily used in marketing, while ROI is universally applicable.
Yes, our ROI calculator is 100% free. All calculations happen directly in your browser without any data being transmitted to servers. You can use the calculator as many times as you like.
Return on Investment is used in numerous areas: