ROI formula
If you invest $10,000 and get back $14,500, the ROI is 45%.
Annualized ROI
A 45% return is impressive over 3 years but ordinary over 10. Annualizing puts investments of different lengths on the same footing:
$10,000 to $14,500 in 3 years is 13.19% a year. At that rate, money doubles in about 5.6 years.
Getting ROI right
- Include all costs in “amount invested” — fees, commissions, closing costs, renovation and ongoing expenses.
- Include all money received in “amount returned” — sale proceeds plus dividends, rent or interest collected.
- For investments with multiple cash flows over time, an internal rate of return (IRR) calculation is more accurate than simple ROI.
Related Financial Return & Valuation Tools
Quantifying Return on Investment allows capital to be deployed where it generates the highest yield. Benchmark returns against equities and CAGR with our Stock Return Calculator, identify unit sales thresholds using the Break Even Calculator, monitor corporate operating margins via the Business Profit Calculator, and project multi-year compounding growth with our Investment Calculator.
Frequently asked questions
What is a good ROI?
It depends on risk and time. The long-run US stock market has returned roughly 10% a year before inflation; safer investments return less. Compare annualized ROI with what you could earn elsewhere at similar risk.
Can ROI be negative?
Yes. If you get back less than you invested, ROI is negative — for example $10,000 returning $8,000 is −20%.
How is marketing ROI calculated?
Use the profit attributed to the campaign (not revenue) as the gain, and the full campaign cost as the investment: (profit − cost) ÷ cost.