What this calculator does
Return on investment compares the gain from an investment with the amount originally committed. It turns very different projects into a single percentage that can be compared on equal terms.
The calculator subtracts additional costs from the final value, then expresses the resulting gain as a percentage of the initial investment.
How the calculation works
Net gain is the final value minus the initial investment and any additional costs. ROI divides that gain by the initial investment and multiplies by 100.
Because the denominator is the initial amount only, additional costs reduce ROI by lowering the gain rather than by inflating the base. This keeps the result comparable with the standard definition.
Worked example: A 5,000 investment returning 7,500
- 1Initial investment: 5,000.00
- 2Final value: 7,500.00
- 3Additional costs: 500.00
- 4Net gain: 7,500.00 − 5,000.00 − 500.00 = 2,000.00
- 5ROI: (2,000.00 ÷ 5,000.00) × 100 = 40%
The investment returned a net gain of 2,000.00, which is a 40% ROI.
Common mistakes
- Including the initial investment again in costs, which double-counts it.
- Comparing ROI figures from different time periods as if they were equivalent.
- Ignoring opportunity cost, such as what the same money could have earned elsewhere.
- Using revenue instead of profit as the final value for a campaign or project.