Skip to content
CalculatorDash
Menu

ROI Calculator

Updated · By the CalculatorDash editorial team · How we check our maths

Quick answer

ROI is (amount returned − amount invested) ÷ amount invested × 100. Turning $10,000 into $15,000 is a 50% ROI. Over three years that is an annualized return of about 14.5%, because annualized ROI accounts for compounding over time.

Return on investment

$
$
years

ROI

50%

Net gain
$5,000
Annualized ROI
14.47%

How this calculator works

ROI is the quickest way to compare investments of different sizes: a new van, an ad campaign, a piece of equipment or a stock. It does not care about time, though, which is why this calculator also shows the annualized return. A 50% return over one year is far better than 50% over ten.

For marketing, ROI is often called ROAS or return on ad spend, but be careful: ROAS usually compares revenue with ad cost, while ROI should compare profit. A campaign with a 3× ROAS can still lose money if your gross margin is below about 33%. Use the profit you made from the investment as the amount returned, plus the money you got back, to keep the comparison honest.

The formula

ROI
(returned − invested) ÷ invested × 100
Annualized ROI
((returned ÷ invested) ^ (1 ÷ years) − 1) × 100

Worked example

A landscaper spends $8,000 on a ride-on mower that lets them take on extra jobs worth $5,500 in profit a year. After two years they have $11,000 back: an ROI of 37.5%, or about 17.3% a year.

Tips

  1. 01Include every cost in 'invested': setup, training and your own time.
  2. 02Use profit, not revenue, as the amount returned for business investments.
  3. 03Compare annualized ROI with your cost of borrowing. If the loan costs more, the investment loses money.

Frequently asked questions

How is ROI calculated?

Subtract the amount invested from the amount returned, divide by the amount invested and multiply by 100.

What is annualized ROI?

The yearly compound rate that would turn your investment into the final amount over the same period. It makes investments of different lengths comparable.

What is a good ROI?

It depends on risk. Many investors compare against a broad stock index or the interest on a safe deposit; a riskier project should beat those comfortably.

Can ROI be negative?

Yes. If you get back less than you put in, ROI is negative. Getting back $8,000 on a $10,000 investment is an ROI of −20%.

Is ROI the same as CAGR?

Annualized ROI as calculated here is the compound annual growth rate (CAGR) of the investment.