Return on Investment (ROI) Calculator
- Net Profit Method
- Capital Growth Method
- Annualized ROI
Investment Cost
Returned Amount
Net Profit/Loss
Return on Investment (ROI)
Original First Price
Dividends Received
Current Price
Return on Investment (ROI)
Investment Cost
Returned Amount
Date of Investment
Date of Return
Total # of Days
Return on Investment (ROI)
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First, define what your investment is, and what you get in return. Both terms are general and you can manipulate them based on your needs as long as you are respecting the base concept – calculating the return on your investment.
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Simply input your own numbers and the calculator will preview the ROI right away. Remember, the higher the ratio, the greater the benefit earned.
What is ROI?
ROI, or Return on Investment, is a metric used to measure the efficiency of an investment. ROI is a useful tool for businesses and investors to determine if the investment they made was worth the cost. This metric is typically used to compare different investments, as well as to evaluate the performance of an investment over time.
How to Use the ROI Calculator?
Using one of the Eacademy ROI calculators is a simple and easy way to get the figures you are looking for. Here’s a brief overview of what information you may need to provide for each of the different approaches presented above.
- For the Net Profit calculator, all you need is your initial investment cost, and the returned amount your investment generated. It’s as simple as it gets!
- To use the Capital Growth calculator, you’ll need to provide the initial price of your investment, the current price, and any dividends received.
- Lastly, the Annualized ROI calculator helps you understand how your investment has performed over a specific period of time. To use this calculator, input your initial investment and the returned amount, then select the time period between the two to get an automated calculation of your ROI.
What is the best way to calculate ROI?
There are several different ways to approach calculating your ROI. The method you should opt for is the one that offers the best advantages in terms of actionable information. Here are the three main ways to calculate ROI.
1. Net Profit Method
The net profit method is one of the simplest and most popular ways to calculate ROI. This calculator uses a method that measures the net profit generated by an investment over a period of time. The formula to calculate ROI with this method is as follows:
ROI = Net income / Cost of investment x 100
This method is particularly useful since it can be used to evaluate both one-time investments and investments that have long-term payoffs. It measures the net profit generated by an investment over a period of time. Another advantage of this method is that it is easy to use and it provides a single number that can be used to evaluate the success of an investment.
However, it is important to be aware of the limitations of this method, as it may not capture all of the costs associated with an investment.
2. Capital Growth Method
If you’re looking to evaluate the long-term performance of an investment, the Capital Growth Method is a useful approach to calculating ROI. It is calculated by subtracting the initial capital invested from the current market value of the investment, then dividing the result by the initial capital invested.To get the final value, all additional dividends that came through are included as well. The calculation can be visualized with the following formula:
(Final Value of Investment – Initial investment) / Cost of investment x 100
The calculation provides a good insight into the growth rate of the investment, expressed as a percentage of the initial capital. This method is useful as it accurately measures the overall performance of the investment. All in all, the Capital Growth Method is a reliable approach to calculating the return on investment and is commonly used by investors and financial advisors.
3. Annualized ROI
As its name suggests, annualized ROI gives an insight into the performance of an investment on an annual basis. By evaluating the performance of an investment over time, businesses can determine whether the investment is worth the cost and whether it aligns with their long-term strategy.
The annualized rate of return determines the average rate of return on investments over any period by averaging them into a yearly time frame.
The main advantage of annualized ROI is that it does not disregard the factor of time as some other ROI calculations might. However, calculating annualized ROI is slightly more complex. If you aren’t using our calculator, you would have to apply the following formula:
[(Final Investment / Initial Investment) ^ (1 / # of Years)] – 1
This method takes into account the length of time the investment was held. It is beneficial to businesses that are looking to assess the long-term effects of an investment and can be used to compare different investment options.
ROI Calculation Example
Let’s take a quick look at a few ROI calculation examples in order to better understand the mentioned methods of calculating ROI.
As previously mentioned, the net profit method is the most common way to calculate ROI. Let’s say that a digital marketer invests 300$ into paid ads and effectively nets 900$ from their marketing campaign. By applying the net profit formula, we can calculate the return on this investment.
Net profit (900-300) / Cost of investment (300 ) x 100 = 200%
The digital marketer from our example has tripled their money, or to be more precise, they have made a 200% ROI.
However, this value can change if we take into consideration the factor of time. This is where annualized ROI comes into play. If we say that the same initial investment and return occurred over a longer period of time, such as 2 years apart, we will get a lower ROI.
For example, if we select the 1st of January 2023 as the initial investment, and the 1st of January 2025 as the date of return, we would have made the return in 731 days, which gives us an ROI of 73.07%.
What are the benefits of ROI calculators?
ROI calculators are invaluable tools for businesses of all sizes. By entering the data from the initial investment and subsequent earnings, the calculator can quickly and accurately determine the value of a specific return on investment. This allows businesses to quickly assess the effectiveness of their investments and make informed decisions on any future investments.
In addition to the accuracy they provide, ROI calculators can save a lot of time that would be spent by applying the formulas by hand. Instead of risking human error and spending an additional amount of time on the calculation, it is a better idea to outsource the task of calculating ROI to an automated calculator.
It is easy to see how ROI calculators can be beneficial for all types of businesses to quickly and effectively gauge their business performance.
Download Your Personal ROI Analysis!
If you’ve made use of one of the ROI calculators already, there is no need to write down all the data. Simply click the “Download PDF” button under the calculator, and you’ll be given an overview of all the data you need, including the date of the calculation, the information you put in, and of course, the final ROI itself. The PDF analysis makes it easy to track your investment calculations and plan your next move accordingly!
Frequently Asked Questions
An ROI formula is a traditional way to calculate the return on investment for your business or venture. The most common ROI formula is the net profit formula which divides the net income by the cost of investment and multiplies it by 100 to get a percentage.
There is no way to broadly define a good ROI as it varies largely between different industries and types of investments. While an ROI of 7% might be considered good on the stock market, much larger returns are to be expected when investing in a marketing campaign.
An ROI of 200% means that an investment has generated two times over its initial value. For example, if the initial value was 100$, the investment would be 300$ after the 200% gain.
There are many different types of formulas and ways to calculate ROI. However, three of them stand out and are the most commonly used. Those three types are the net profit ROI, the capital growth ROI, and the annualized ROI.
ROR stands for rate of return, and it is often used interchangeably with return on investment. However, they are not quite the same. The rate of return focuses on the period of time over which an investment grows, while the return on investment is a slightly broader category.
Return on investment and profit are not necessarily the same. The net profit of a business is a measure of its performance, while ROI focuses on different investments in a business and its growth.
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