What is the ROI formula?

ROI = (final value − cost) ÷ cost × 100%. A result of 25% means you gained a quarter of what you put in.

How do I annualize ROI?

Annualized ROI = (final value ÷ cost)1/t − 1, where t is the number of years held. Do not simply divide ROI by the years; that ignores compounding.

Yes. If the final value is below the cost, ROI is negative; −100% means the whole investment was lost.

Is ROI the same as profit margin?

No. ROI divides profit by the amount invested; profit margin divides profit by revenue.

ROI Formula and Calculator

Home › Finance Formulas › ROI Formula and Calculator

Return on Investment (ROI) Calculator

Return on investment measures how much an investment gained or lost relative to what it cost: ROI = (final value − cost) ÷ cost, usually shown as a percentage. It works for almost anything, from a stock position to a marketing campaign or a piece of equipment, as long as you can put a money value on what went in and what came out.

Formula

ROI = Final value − CostCost × 100% Annualized ROI = (Final valueCost)^1/t − 1

Where

Final value: what the investment is worth or sold for, including any income received
Cost: total amount invested (purchase price plus costs)
t: years the investment was held

Calculator

Amount invested (cost)

Final value

Years held (optional, for annualized ROI)

Result and step-by-step solution

Return on investment

50%

Equivalent to 14.47% a year compounded over 3 years.

Net gain
15,000.00 − 10,000.00 = 5,000.00
Divide by the cost
ROI = 5,000.0010,000.00 = 0.5 = 50%
Annualize over 3 years
(15,000.0010,000.00)^1/3 − 1 = 14.47% a year

How to use the formula

Include every cost in the denominator (purchase price, fees, installation) and every benefit in the final value (sale proceeds plus any income received along the way). Otherwise ROI looks better or worse than it really is.

Plain ROI has one big weakness: it ignores time. A 50% ROI earned in one year is excellent; over ten years it is poor. That is why the calculator also annualizes the result: (final value ÷ cost)^1/t − 1. In the default example, 10,000 grows to 15,000 for an ROI of 50%, which over 3 years is 14.47% a year. That annualized figure is the same as the CAGR, and it can be compared with an interest rate or a project IRR.

Frequently asked questions

What is the ROI formula?: ROI = (final value − cost) ÷ cost × 100%. A result of 25% means you gained a quarter of what you put in.
How do I annualize ROI?: Annualized ROI = (final value ÷ cost)^1/t − 1, where t is the number of years held. Do not simply divide ROI by the years; that ignores compounding.
Can ROI be negative?: Yes. If the final value is below the cost, ROI is negative; −100% means the whole investment was lost.
Is ROI the same as profit margin?: No. ROI divides profit by the amount invested; profit margin divides profit by revenue.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.