ROI Calculator
Calculate net profit, total percentage ROI, annualized compounding rate of return, and MOIC for any financial investment or business venture.
Capital Outlay vs. Net Profit Ratio
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Understanding Return on Investment (ROI) and Capital Efficiency
Return on Investment (ROI) is the universal performance benchmark used by investors, corporate executives, and entrepreneurs to evaluate the profitability of an expenditure or compare relative efficiency across competing capital allocations. Calculating ROI enables you to determine whether financial returns justify invested capital, opportunity costs, and associated downside risks across stocks, real estate, acquisitions, or marketing campaigns.
Core Formulas: Simple ROI vs. Annualized Return (CAGR)
Accurate investment analysis requires evaluating both cumulative percentage returns and time-weighted annualized compounding:
- Simple Return on Investment (%): ROI = [(Gross Final Value - Total Invested Capital) ÷ Total Invested Capital] × 100
- Net Investment Profit: Net Profit = Gross Proceeds - (Initial Capital Outlay + Recurring Fees / Upgrades)
- Annualized ROI (CAGR): Annualized ROI = [(Gross Final Value ÷ Total Invested Capital)^(1 ÷ Tenure in Years)] - 1
- Multiple on Invested Capital (MOIC): MOIC = Gross Proceeds ÷ Total Invested Capital
Frequently Asked Questions
What is the formula for Return on Investment (ROI)?
Basic ROI is calculated as: ROI (%) = [(Final Value - Total Investment Cost) / Total Investment Cost] * 100. For example, if you invest $10,000 and sell for $13,500, your net profit is $3,500 and your ROI is ($3,500 / $10,000) * 100 = 35.0%.
What is the difference between Simple ROI and Annualized ROI?
Simple ROI shows cumulative percentage gain over the entire duration regardless of time, while Annualized ROI (similar to CAGR) expresses that gain on a standard per-year basis: Annualized ROI = ((1 + Total ROI)^(1 / Years)) - 1. A 50% return over 5 years is ~8.45% annualized, whereas 50% in 1 year is a full 50% annualized.
What is MOIC (Multiple on Invested Capital)?
MOIC measures total gross return as a multiple of invested cash: MOIC = Total Final Value / Total Cash Invested. A $20,000 exit on a $10,000 investment represents a 2.0x MOIC (or a 100% net ROI).
What is considered a good ROI?
In public stock markets, the historical S&P 500 benchmark averages ~10% nominal annual return (~7% inflation-adjusted). For private real estate, investors typically seek 8% to 15% annualized ROI, while venture capital and startup investments target 25%+ annual return to compensate for higher insolvency risks.