Return on Investment (ROI) Calculator
Measure the gain or loss on an investment, as a percentage of what you paid.
- Return on investment
- 40%
- Gain or loss
- $800.00
You gained $800.00 on $2,000.00. A negative figure means a loss.
How it is calculated
ROI = (value now − cost) ÷ cost × 100
Example: you paid $2,000 and it is now worth $2,800. The return is 40%.
Assumptions and limitations
- ROI does not account for time. Over 2 years, 40% is a different result from 40% over 10 years; use CAGR to compare.
- It does not include fees, taxes or costs not in the cost figure.
- A figure from a single sale or a short period can mislead.
What this calculator tells you
Return on investment, or ROI, measures the gain or loss on an investment as a percentage of what was put in. It is one of the most widely used measures in finance, business and personal decisions, because it is simple to calculate and easy to compare across different kinds of spending.
This calculator takes the cost of an investment and its final value, and shows the gain in money and the return as a percentage. It does not account for the time the money was invested, so for comparisons across different periods an annual measure is also needed.
How ROI is worked out
ROI equals the gain divided by the cost, multiplied by 100. The gain is the final value minus the cost. A positive ROI means the investment increased in value, and a negative ROI means it lost value. Because the figure is a ratio, the same gain can represent a very different ROI depending on the cost of the investment.
A worked example
Suppose you spend 2,000 on a training course that you estimate will be worth 2,600 in extra earnings. The gain is 600, and the ROI is 600 divided by 2,000, which is 30%. If the course had cost 1,000 for the same gain, the ROI would be 60%. This shows why the cost base must be stated clearly when comparing returns.
ROI and time
A 30% return over one year is very different from a 30% return over ten years. ROI does not show the period, so it can make a slow investment look as good as a fast one. To compare investments of different lengths, convert the result to an annual rate, such as the compound annual growth rate, or use the IRR for irregular cash flows.
Limits of the calculation
The result depends on how the cost and the final value are measured. Hidden costs, such as time, maintenance or fees, are often left out and make the true ROI lower. Value estimates for personal or business investments are sometimes optimistic, so use conservative figures. Tax and inflation are not included unless you adjust the inputs for them.
Comparing ROI across projects
When comparing projects, use the same definition of cost and the same time frame, and be explicit about whether benefits are cash returns, savings or intangible gains. Projects with large intangible benefits are hard to compare on ROI alone, so state the assumption used for each value.
Also consider the risk of the estimated value. A project with a high ROI based on uncertain benefits may be less attractive than one with a modest, well-evidenced return.
Using the result
Use ROI to compare options with the same time frame and with the same definition of cost and value. Include all relevant costs, and check the final value against a realistic estimate rather than the best case. A positive ROI on paper is only meaningful if the value is actually realised.
Testing the return with lower values
Run the calculation with a final value 20% lower than your estimate, to see how much the return depends on the forecast. Investments with a high ROI often rely on a single optimistic assumption, and a small shortfall in that assumption can turn a good return into a poor one. Testing the downside shows the range of outcomes you should be prepared for.
Frequently asked questions
How do I calculate ROI?
Subtract the cost from the final value to get the gain, then divide the gain by the cost and multiply by 100. A cost of 2,000 and a value of 2,600 give a 30% ROI.
Does ROI show how long an investment took?
No. It is a total return. To compare investments over different periods, convert it to an annual rate.
What costs should I include?
All costs of the investment, including purchase price, fees, running costs and any necessary upgrades. Leaving out costs makes the ROI look better than it is.
Is a negative ROI always bad?
It means the investment lost value on the figures used. Whether that is acceptable depends on the reason for the investment and the alternatives available.
Does this include tax or inflation?
No. Enter the cost and value after tax if you want an after-tax return, and adjust the value for inflation if you want a real return.