ROI Calculator

The free ROI calculator enables you to calculate the profit or loss returns on the investment you make.

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The advanced ROI calculator helps you to calculate total and annualized return on investment. Enter either investment length or dates and get forecasted profitability on your investment with this return on investment calculator.

What Is ROI?

In the context of finance and business:

“The ratio of net gain to an investment is called return on investment”

ROI calculation gives an idea of the profitability of an investment. After an investment is made, the return on investment helps you to estimate the average increase in it after a specified duration of time. This is because dividends can occur that changes the overall return.

How To Calculate ROI?

You can calculate rate of return with the following formulas:

Simple ROI:

$\text{ROI } = \dfrac{\text{net fv - iv}}{\text{iv}} \times 100$

Where;

ROI = Return on Investment

net fv = Net Final Value

iv = Initial Investment

Annualized ROI:

$\text{Annualized ROI } = \left[ {\left(1 + \dfrac{\text{net fv - iv}}{\text{iv}} \right)}^{\frac{1}{n}} -1 \right] \times 100$

Where;

Annualized ROI = Return on Investment on an Annual Basis

net fv = Net Final Value

iv = Initial Investment

n = Number of investment years (time span)

Numerical Examples:

Let us resolve a couple of examples to clarify how to calculate return on investment! In case you need fast results, you may better utilize this ROI calculator for free.

Example # 01:

Suppose you purchased a house for $600000. After 2 years, you decided to sell it for $900000 due to inflation. How to calculate rate of return? What would be the actualized ROI?

Solution:

To instantly get the return on investment, you may use our annualized return calculator. But if your goal comes up with manual computations, continue reading!

Simple ROI:

$\text{net final value = fv + inc - exp}$

$\text{net fv = }900000 + 0 - 0$

$\text{net fv = }900000$

$\text{ROI = } \dfrac{\text{net fv - iv}}{\text{iv}} \times 100$

$= \dfrac{(900000 - 600000)}{600000} \times 100$

$= \dfrac{300000}{600000} \times 100$

$= 0.5 \times 100$ $\text{ROI }= 50\%$

Annualized ROI:

$text{Annualized ROI } = \left[ {\left(1 + \dfrac{\text{net fv - iv}}{\text{iv}} \right)}^{\frac{1}{n}} -1 \right] \times 100$

$= \left[ {\left(1 + \dfrac{900000 - 600000}{600000} \right)}^{\frac{1}{2}} -1 \right] \times 100$

$= \left[ {\left(1 + 0.5 \right)}^{\frac{1}{2}} -1 \right] \times 100$

$= \left[ {\left(1.5 \right)}^{0.5} -1 \right] \times 100$

$= (1.2247 -1 ) \times 100$ $= 0.22474 \times 100$

$\text{Annualized ROI} = 22.474 \%$

ROI and Financial Decisions:

Return on investment is a key parameter that assists investors in taking decisions regarding the rational financial structure of a business. The following table is packed with the alternatives to expect whether the ROI is good or not!

On The Basis of Predefined Limit Value
ROI ≥ LV	Investment Is Profitable
ROI < LV	Investment Is Unprofitable
In Simple Means
ROI ≥ 0	Investment Is Profitable
ROI < 0	Investment Is Unprofitable
On The Basis of ROIb
ROI ≥ ROIb	Investment Is Profitable (Acceptable)
ROI < ROIb	Investment Is Unprofitable (Not Acceptable)
On The Basis of Weighted Average Cost of Capital (WACC)
ROI ≥ WACC	Investment Is Profitable (Acceptable)
ROI < WACC	Investment Is Unprofitable (Not Acceptable)