ROI Calculator

How to Use This Calculator

To use the ROI calculator, you need to input the cost of investment, the gain from investment, and the time period of the investment. The cost of investment is the amount you spend on a project or asset, the gain from investment is the amount you earn from it, and the time period is how long you hold the investment. For example, if you invest $1,000 in a project that earns $1,500 over 2 years, you would input these values into the calculator to find your return on investment.

The Formula Behind It

The formula for calculating ROI is: (Gain from Investment - Cost of Investment) / Cost of Investment * 100 / Time Period. The variables are:

• Gain from Investment: the total amount earned from the investment
• Cost of Investment: the initial amount spent on the investment
• Time Period: the duration of the investment in years.

Practical Examples

Here are a few scenarios to illustrate how the calculator works:

• If you invest $5,000 in a business that earns $8,000 over 5 years, the calculator would output an ROI of 6% per year.
• A real estate investor buys a property for $200,000 and sells it for $250,000 after 3 years, the calculator would show an ROI of 8.33% per year.
• A company spends $10,000 on a marketing campaign that generates $15,000 in revenue over 1 year, the calculator would output an ROI of 50% per year.

Common Questions

What is a good ROI percentage?

A good ROI percentage depends on the type of investment, but generally, 10-15% per year is considered a decent return.

How does ROI differ from profit?

ROI takes into account the initial investment, while profit only considers the earnings.

Can ROI be negative?

Yes, if the gain from investment is less than the cost of investment, the ROI will be negative, indicating a loss.

How does time period affect ROI?

A longer time period will generally result in a lower ROI, as the return is spread out over more years.

Is ROI the only factor to consider when evaluating investments?

No, other factors like risk, liquidity, and alignment with goals should also be considered when making investment decisions.