What Is ROI?
ROI, or Return on Investment, measures how profitable an investment is compared to its original cost. It is one of the most commonly used financial metrics for evaluating performance.
How ROI Is Calculated
ROI is calculated by subtracting the investment cost from the final value, dividing the result by the original cost and multiplying by 100 to obtain a percentage.
Why ROI Matters
ROI helps investors, entrepreneurs and marketers compare opportunities and determine which projects generate the greatest returns.
Using ROI for Business Decisions
Businesses often use ROI to evaluate advertising campaigns, equipment purchases, product launches and operational improvements.
Practical ROI Example
If an investment costs $10,000 and later generates $13,000, the profit is $3,000. The ROI would be 30%, indicating a positive return on the original investment.
Understanding Positive and Negative ROI
A positive ROI indicates a profit, while a negative ROI indicates a loss. Investors often compare ROI across multiple opportunities before making decisions.
Common ROI Mistakes
Many people ignore fees, taxes, time horizon and risk when evaluating ROI. These factors can significantly affect real-world results.
Using This ROI Calculator
Enter your investment cost and net profit to instantly calculate ROI percentage and total return.