📈 ROI Calculator

How to Calculate and Interpret ROI

Return on Investment (ROI) is calculated as: ROI = (Net Gain ÷ Cost) × 100. Net Gain is what you received minus what you invested. If you invested $10,000 and received $15,000 back, your net gain is $5,000, and your ROI is (5,000 ÷ 10,000) × 100 = 50%.

ROI is deliberately simple, which is both its strength and its limitation. It doesn't account for the time over which the return was achieved. A 50% ROI over 10 years is very different from a 50% ROI over 6 months. When comparing investments, you should either ensure you're comparing over the same time period, or convert to an annualised ROI (also called CAGR — Compound Annual Growth Rate) for a fair comparison.

In business, ROI is applied to almost every type of spending decision: marketing campaigns, new equipment, hiring decisions, software subscriptions, training programmes. The logic is the same — what did we spend, and what return did it generate? A marketing campaign that cost $20,000 and produced $80,000 in attributable sales has an ROI of 300%. A training programme that cost $15,000 per employee and reduced costly errors by $30,000 annually has a similar ROI calculation.

A positive ROI means the investment returned more than its cost. A negative ROI means a loss. A zero ROI means you broke even. In most business contexts, an ROI below your cost of capital (typically 8–15% for businesses) means the investment wasn't worthwhile — the money could have earned more sitting in a money market account.

ROI doesn't capture risk. Two investments with the same ROI may have very different risk profiles. A high-yield property development and a government bond might both show 8% returns, but the volatility and probability of that return differ substantially. Always consider ROI alongside risk before making investment decisions.