Question 1

How is ROI calculated?

Accepted Answer

ROI equals the net profit divided by the cost of the investment, multiplied by 100 for a percentage. Net profit is your return minus the original cost. This calculator also shows the return ratio and profit per dollar invested.

Question 2

What is a good ROI?

Accepted Answer

A good ROI depends on risk and the alternative. Stock markets historically average around 7-10% annually, so anything above that with comparable risk is often considered strong. Low-risk investments justify lower returns.

Question 3

Does ROI account for time?

Accepted Answer

Basic ROI does not factor in time, so it can overstate short-term wins. For comparisons across periods, use annualized ROI or CAGR, which this calculator approximates when you supply a holding period where relevant.

Question 4

What is the difference between ROI and profit margin?

Accepted Answer

ROI measures return relative to the money invested, while profit margin measures profit relative to revenue. A business can have high margins but modest ROI if it tied up a lot of capital, or vice versa.

Question 5

How do I include ongoing costs in ROI?

Accepted Answer

Subtract all costs tied to the investment, not just the purchase price, when computing net profit. Include fees, maintenance, and opportunity costs for the most accurate ROI figure over the holding period.

ROI Calculator

How to Use the ROI Calculator

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