What Is the ROI Calculator?
ROI measures the profitability and performance efficiency of an investment relative to its cost.
How Does the ROI Calculator Work?
It subtracts initial cost from final value to determine net earnings, then normalizes by the cost base.
ROI Calculator Formula & Variables
The core mathematical equation utilized by this calculator is expressed as:
Total ROI divides net profit by the original purchase cost. Compound Annual Growth Rate (CAGR) geometric mean accounts for the holding duration.
How to Use the ROI Calculator
- Enter the starting investment cost and ending value.
- Enter the number of years held to calculate compound annual growth.
Step-by-Step Example Calculation
$10,000 Growing to $15,000 Over 2 Years
Input Values:
initialInvestment:10000
finalValue:15000
holdingYears:2
currency:USD
Worked Steps: Generates a 50.00% total ROI ($5,000 net profit) and an annualized compound return of 22.47% per year.
Understanding Your Result
The headline result showcases the overall percentage return.
Summary stats provide net gain and annualized growth rate.
Factors That Affect the Result
- Dividends, reinvested capital, trading fees, and taxes all affect net realized ROI.
When Should You Use This Calculator?
- Evaluating real estate flips, equity portfolios, or corporate project capital expenditures.
Assumptions & Limitations
- Assumes a single lump-sum initial investment and lump-sum exit.
Frequently Asked Questions
Calculation Accuracy & Reference Note
Formulas follow international corporate finance standards.