Return on Investment (ROI) Calculator

Calculate Your Return on Investment

Use this calculator to determine your Return on Investment (ROI), Annualized ROI, and Gain/Loss. Enter your initial investment, final value, and investment period to evaluate your investment performance.

How to Calculate Return on Investment (ROI)

Return on Investment (ROI) is a crucial financial metric used to evaluate the efficiency or profitability of an investment. It measures the amount of return on a particular investment, relative to the investment's cost. Understanding how to calculate ROI is essential for investors, business owners, and financial analysts in making informed decisions.

ROI Formula

The basic formula for calculating ROI is:

$$\text{ROI} = \frac{\text{Gain from Investment} - \text{Cost of Investment}}{\text{Cost of Investment}} \times 100\%$$

Where:

  • Gain from Investment: The total return from the investment
  • Cost of Investment: The initial amount invested

For annualized ROI, which takes into account the time period of the investment, we use:

$$\text{Annualized ROI} = \left(\left(\frac{\text{Final Value}}{\text{Initial Investment}}\right)^{\frac{1}{\text{Number of Years}}} - 1\right) \times 100\%$$

Calculation Steps

  1. Determine the initial investment amount.
  2. Calculate the final value of the investment.
  3. Subtract the initial investment from the final value to get the net profit.
  4. Divide the net profit by the cost of the investment.
  5. Multiply the result by 100 to get the percentage ROI.
  6. For annualized ROI, use the formula above, considering the investment period.

Example Calculation

Let's calculate the ROI for an investment with the following data:

  • Initial Investment: $10,000
  • Final Value: $15,000
  • Investment Period: 3 years

Step 1: Calculate ROI

$$\text{ROI} = \frac{15,000 - 10,000}{10,000} \times 100\% = 50\%$$

Step 2: Calculate Annualized ROI

$$\text{Annualized ROI} = \left(\left(\frac{15,000}{10,000}\right)^{\frac{1}{3}} - 1\right) \times 100\% = 14.47\%$$

Therefore, the total ROI for this investment is 50%, and the annualized ROI is 14.47%.

Visual Representation

Initial Final Investment Value Amount ($)

This diagram illustrates the change in investment value. The blue bar represents the initial investment, and the green bar represents the final value. The difference in height between these bars visually demonstrates the return on investment.

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