ROI Calculator

Return relative to the investment cost

ROI is a simple relative measure that can compare differently sized projects, provided costs and proceeds are defined consistently. The annualized equivalent solves a constant compound rate between total cost basis and total proceeds across the entered years. It treats costs as committed at the start and proceeds, including income, as received at the end.

For a product or sale, the Profit Margin Calculator distinguishes profit as a share of revenue from markup on cost.

The formula

Cost basis equals initial investment plus additional costs. Proceeds equal ending value plus income received. Subtract cost basis from proceeds to find net profit or loss, then divide by cost basis and multiply by 100. Annualization is optional. Intermediate income and later expenses are pooled into endpoint equivalents; actual cash-flow dates are not modeled. This is not an IRR or money-weighted return.

How to use this calculator

1. Enter initial investment, ending value and income received in one currency. Do not count retained income twice.
2. Open Advanced options to add costs not already included in the initial investment.
3. Optionally select Show an annualized equivalent and enter the holding period in years. Use this endpoint approximation only when its timing assumption is appropriate.
4. Check the live cost basis, total proceeds, profit and return working before comparing alternatives.

Avoid counting receipts or expenses twice

If the ending value already includes retained income, entering that income separately would overstate the return. Likewise, do not add a purchase fee again if it is already part of the initial investment. Use a consistent gross-or-net approach for the entered proceeds and costs.

A percentage does not describe the holding period

Total ROI has no time component. A 20% gain over two years corresponds to approximately 9.5445% per year under a constant compound start/end model, whereas the same gain in one year corresponds to 20%. Select the annualized option to make that time basis explicit.

This optional equivalent pools additional costs into the initial basis and income into final proceeds. It does not model when those amounts actually occur. Dated or substantial intermediate cash flows require a return model that accounts for their timing. Unsold ending value remains unrealized.

Assumptions & limitations

What this calculation assumes

• Income is received in addition to ending value.
• Additional costs belong in the cost basis.
• All amounts use one currency.

What to keep in mind

• Actual cash-flow dates, IRR, taxes and opportunity cost are not modeled. Optional annualization treats pooled costs at the start and proceeds at the end; very short periods can produce an unrepresentably large annualized rate, which is labeled rather than shown as infinity.
• Inputs must use consistent valuation methods and one currency.

Common questions