What is ROI?
ROI (Return on Investment) is a financial metric used to measure the profitability of an investment. It compares the net profit to the original investment cost and expresses the result as a percentage.
ROI Calculator – Calculate Return on Investment Percentage Instantly
Our free ROI calculator helps you calculate return on investment (ROI) percentage using investment cost and total revenue. Use this ROI calculation tool for business investments, marketing campaigns, startups, and financial planning.
📊 Tip: Positive ROI means profit, while negative ROI means loss.
ROI Formula, Explanation & Example
What is ROI and Why It Matters
ROI (Return on Investment) is a crucial financial metric that measures the efficiency and profitability of an investment. It helps businesses and investors make data-driven decisions by comparing the gain from an investment to its cost.
Common ROI Applications
- Marketing Campaign ROI: Measure ad spend effectiveness
- Business Investment ROI: Evaluate equipment or expansion
- Real Estate ROI: Calculate property investment returns
- Stock Market ROI: Assess portfolio performance
ROI Calculator Formula, Explanation & Example
ROI (Return on Investment) is calculated using the following formula:
ROI = ((Revenue − Cost) ÷ Cost) × 100
The result is expressed as a percentage, showing how much profit or loss an investment generates relative to its cost.
Step-by-Step ROI Example
Step 1: Investment Cost = 5,000
Step 2: Revenue Generated = 6,500
Step 3: Profit = 6,500 − 5,000 = 1,500
Step 4: ROI = (1,500 ÷ 5,000) × 100 = 30%
This means the investment returned a 30% profit over its original cost.
How to Interpret ROI
- Positive ROI: The investment is profitable.
- Zero ROI: No profit or loss.
- Negative ROI: The investment resulted in a loss.
When Should You Use ROI?
ROI is commonly used to evaluate business projects, marketing campaigns, real estate investments, startups, and financial decisions where costs and returns can be measured.
Frequently Asked Questions
How is ROI calculated?
ROI is calculated using the formula: ((Revenue − Cost) ÷ Cost) × 100. This formula determines how much profit or loss was generated relative to the amount invested.
What is considered a good ROI?
A good ROI depends on the industry, risk level, and investment type. In many business contexts, an annual ROI of 15–20% is considered strong, but acceptable returns vary based on market conditions.
Can ROI be negative?
Yes. A negative ROI indicates that the investment resulted in a loss, meaning the costs exceeded the revenue generated.
Why is ROI important?
ROI helps businesses and investors evaluate the efficiency of investments, compare different opportunities, and make informed financial decisions. It provides a simple way to assess profitability and risk.
ROI vs IRR vs NPV: Which Metric Should You Use?
For more complex calculations, see our NPV Calculator or IRR Calculator.