Business ROI
Calculate net profit and ROI from the amount invested and the amount returned. Includes a worked example, annualised ROI and the limits of the simple ratio.
Results · USD
Net profit
- ROI
- 50%
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Educational estimates · not financial advice · free, no signup
Formula / how it works
Net profit = amount returned − amount invested. ROI = net profit ÷ amount invested × 100. Annualised ROI = (returned ÷ invested)^(1 ÷ years) − 1.
Detailed guide
What it is, how to use it, how to read the numbers, common mistakes, a worked example, formulas, and FAQs.
What this calculator is
Return on investment compares what you got back with what you put in. It is the quickest way to judge whether a campaign, equipment purchase or project paid for itself. This calculator takes the amount invested and the amount returned, subtracts to find net profit and expresses it as a percentage of the investment. Managers and founders use ROI to rank options, marketers to evaluate ad spend, and individuals to judge side projects. The simple ratio ignores time and risk, so two projects with the same ROI can be very different if one takes a year and the other five. Where time matters, annualise the figure.
When to use / who it helps
- You are comparing the payoff of two projects or campaigns.
- You want to know whether an ad budget returned more than it cost.
- You are justifying an equipment or software purchase.
- You need a simple number for a report or pitch.
- You want to see profit as a percentage of the amount invested.
How to use
Steps
- Enter the total amount invested, including all costs.
- Enter the total amount returned, including revenue or resale value.
- Read the net profit in money terms.
- Read ROI as a percentage of the investment.
- Compare ROI with the time taken and with alternatives.
- Include every cost; if some costs are missing, ROI will be overstated.
How to interpret results
- Positive ROI means a gain, negative ROI a loss, and 0% break-even.
- ROI of 50% means you earned half of what you invested on top of your original money.
- Simple ROI does not account for time; annualise it to compare projects of different length.
- ROI is not profit margin; margin divides profit by revenue, not by the investment.
- Uncertain future returns make the ROI an estimate that deserves a range of scenarios.
Common mistakes & gotchas
- Leaving out costs such as labour, fees or opportunity costs, which inflates ROI.
- Comparing ROI of projects with different durations.
- Confusing ROI with margin or markup.
- Using revenue rather than profit-related return when costs are not netted.
- Treating a forecast return as certain.
Worked example
Worked example — invest $5,000, get back $7,500
- Net profit: 7,500 − 5,000 = $2,500.
- ROI: 2,500 ÷ 5,000 = 0.50, or 50%.
- Annualise over 2 years: (7,500 ÷ 5,000)^(1/2) − 1 = 1.5^0.5 − 1 ≈ 22.47% per year.
- Over 5 years, the same 50% total would be only about 8.45% per year.
Result: Net profit $2,500 and ROI of 50% (about 22.5% a year if it took two years).
To load the form's own demo values, tap Try example above the Calculate button.
How to calculate / formula
Net profit = amount returned − amount invested. ROI = net profit ÷ amount invested × 100. Annualised ROI = (returned ÷ invested)^(1 ÷ years) − 1.
Frequently asked questions
How is ROI calculated?
Net profit divided by the amount invested, multiplied by 100 to give a percentage.
What is a good ROI?
It depends on the industry, risk and time. Compare against alternatives and the cost of capital rather than a fixed number.
Does ROI include time?
No. Annualise the figure when comparing projects of different length.
Is ROI the same as profit margin?
No. ROI uses the investment as the base; margin uses revenue.
What should count as an investment?
All cash costs and, ideally, the value of your time or opportunity costs.
Can ROI be negative?
Yes. If you get back less than you put in, the ROI is negative.