How to Calculate ROI (Return on Investment)
Return on Investment (ROI) measures the profitability of an investment as a percentage. It's one of the most widely used financial metrics.
ROI Formula
ROI = ((Gain - Cost) / Cost) × 100
Where:
- ROI = Return on Investment as a percentage
- Gain = Total value received from the investment
- Cost = Total cost of the investment
Step-by-Step:
- 1
Calculate net profit
Subtract the cost from the gain (or current value).
- 2
Divide by cost
Divide net profit by the original investment cost.
- 3
Multiply by 100
Convert to percentage.
Worked Examples:
Stock investment
Purchase Price: $1,000Current Value: $1,500
Result: 50% ROI
ROI = ((1500 - 1000) / 1000) × 100 = 50%