ROI (Return on Investment)
Definition
A profitability metric measuring the percentage return on an investment relative to its cost: ROI = (Net Profit / Cost of Investment) × 100.
Why is ROI (Return on Investment) Important?
ROI (Return on Investment) is a critical concept in corporate finance, business analysis, and investment decision-making. Whether you are evaluating a company's performance, assessing an investment opportunity, or running your own business, understanding this metric helps you make data-driven decisions that maximize returns and minimize risk.
Our business calculators provide instant computations for this metric, empowering entrepreneurs, analysts, and investors to evaluate financial health and make strategic decisions with confidence.
What is ROI (Return on Investment)?
Return on Investment (ROI) measures the gain or loss from an investment relative to its cost, expressed as a percentage. It is the most widely used metric for evaluating the efficiency of an investment.
ROI Formula
ROI = ((Gain − Cost) / Cost) × 100
ROI Examples
| Investment | Cost | Return | ROI |
|---|---|---|---|
| Stock purchase | $10,000 | $12,500 | 25% |
| Marketing campaign | $5,000 | $20,000 revenue | 300% |
| College degree (4 yr) | $100,000 | $500K extra lifetime earnings | 400% |
| Solar panels | $20,000 | $45,000 savings (25 yr) | 125% |
What is a Good ROI?
| Context | Good ROI |
|---|---|
| Stock market (S&P 500 avg) | ~10% per year |
| Real estate | 8–12% per year |
| Business investments | 15–25%+ |
| Marketing campaigns | 5:1 (500%) |