What is the ROI Formula?
The standard ROI formula is simple:
Where Net Profit = Final Value − Initial Investment − Additional Costs.
ROI Formula Example
- Initial Investment: $1,000
- Final Value: $1,500
- Net Profit: $500
- ROI: ($500 / $1,000) × 100 = 50%
How to Calculate ROI (Step-by-Step)
- Determine your initial investment. This is the total amount of money you put in.
- Determine your final value. This is what the investment is worth now, or what you sold it for.
- Subtract the initial investment from the final value. This gives you your net profit.
- Divide the net profit by the initial investment.
- Multiply by 100. This converts the decimal into a percentage.
Monthly & Annualized ROI (Yearly ROI)
Simple ROI does not account for how long your money was invested. A 50% ROI over 1 year is very different from a 50% ROI over 10 years. That's why annualized ROI is important.
Where n is the number of years the investment was held.
Monthly ROI
To estimate monthly ROI, simply divide your annualized ROI by 12. For example, a 12% annualized ROI is roughly 1% per month.
Crypto ROI Calculator
Crypto ROI works exactly the same as any other investment. You just need the price you bought at and the price you sold at (or the current price).
Example: You buy Bitcoin at $30,000 and sell at $45,000.
ROI = (($45,000 − $30,000) / $30,000) × 100 = 50%.
Property ROI Calculator
Property ROI is slightly more complex because you need to factor in rental income, expenses (taxes, maintenance, insurance), and appreciation.
Use the calculator above by entering your total investment (down payment + closing costs) as the Initial Investment, and your total return (rental income + final sale price) as the Final Value.
ROI Formula in Excel
If you prefer to calculate ROI in a spreadsheet, here is the exact formula:
Format the cell as a Percentage to see the ROI. For example, if A1 is your initial investment and B1 is your final value, type =(B1-A1)/A1.
ROAS vs ROI: What's the Difference?
Many people confuse ROAS (Return on Ad Spend) with ROI (Return on Investment). They are not the same.
- ROAS measures the revenue generated for every dollar spent on advertising. Formula:
ROAS = Revenue / Ad Spend. If you spend $1,000 on ads and make $5,000, your ROAS is 5x. - ROI measures overall profitability, including all costs (not just ad spend). Formula:
ROI = (Net Profit / Total Investment) × 100.
ROAS is a marketing metric. ROI is a business metric. You can have a high ROAS but a negative ROI if your product costs and overhead are too high.
Frequently Asked Questions
What is the formula for ROI?
The ROI formula is: ROI = (Net Profit / Investment Cost) × 100. For example, if you invest $1,000 and earn $1,500, your net profit is $500. ROI = ($500 / $1,000) × 100 = 50%.
How do you calculate monthly ROI?
To calculate monthly ROI, divide your total ROI by the number of months the investment was held. For example, a 12% annual ROI is roughly 1% per month.
What is the difference between ROI and ROAS?
ROI (Return on Investment) measures overall profitability. ROAS (Return on Ad Spend) measures the revenue generated for every dollar spent on advertising. ROAS is a marketing metric, while ROI is a broader financial metric.
How do you calculate crypto ROI?
Crypto ROI is calculated the same way as any investment: ROI = ((Current Value - Initial Investment) / Initial Investment) × 100. For example, buying Bitcoin at $30,000 and selling at $45,000 gives a 50% ROI.
What is the ROI formula in Excel?
In Excel, the ROI formula is: =(Final_Value - Initial_Investment) / Initial_Investment. Format the cell as a percentage to see the ROI.