Measure how well an investment performed — a stock, a rental property, a marketing campaign, or new equipment for your business.
Optional — needed for annualized return
Return on investment
—
Net gain / loss
—
Annualized return (CAGR)
—
The ROI formula
ROI = (Final value − Amount invested) ÷ Amount invested × 100. It's the universal language for comparing investments: a 40% ROI means every dollar in produced $1.40 back. "Amount invested" should include all costs — purchase price, fees, renovations, ad spend — and "final value" should be net of selling costs.
Why annualized return matters more
A 40% ROI is spectacular in one year and mediocre over fifteen. CAGR (compound annual growth rate) converts total return into a per-year rate: CAGR = (Final ÷ Invested)1/years − 1. Use CAGR when comparing investments held for different lengths of time — it's the honest comparison.
ROI for small business decisions
The same math prices business choices: a $2,000 ad campaign that produces $6,000 in gross profit has a 200% ROI. For equipment, compare the ROI of the purchase against what the money could earn elsewhere. Anything below your cost of borrowing is usually not worth financing.
Frequently asked questions
What's a "good" ROI?
Context is everything. Long-run stock market averages are roughly 7–10% per year; rental real estate investors often target 8–12% cash-on-cash; marketing campaigns are frequently expected to return 3–5× ad spend. Compare against alternatives with similar risk, not against a universal number.
Does this account for ongoing income like rent or dividends?
Include it in "amount returned": final value = sale proceeds + all rent/dividends received − ongoing costs. That gives total-return ROI, the most complete measure.
What's the difference between ROI and profit margin?
ROI measures return on money invested; margin measures profit as a share of revenue. A product can have thin margins but great ROI if inventory turns over quickly. We have a separate profit margin calculator for pricing decisions.
Can ROI be negative?
Yes — if the final value is less than what you put in, ROI is negative and this calculator will show the loss in red-flag territory. Negative CAGR means the investment shrank on average each year.
Cookies & ads. We use cookies for ads personalization and measurement (Google AdSense). You can accept or reject — the site works either way. See our Privacy Policy.
