ROI Calculator
Calculate Return on Investment (ROI) percentage, net profit, and annualized return for commercial ventures.
Last verified: September 2026Inputs & Parameters
Calculation Results
Commercial return on $5,500 total invested cost over 2 years.
Return on Investment (ROI) and Annualized Returns
Return on Investment (ROI) evaluates the efficiency and profitability of an investment. While total ROI measures cumulative percentage gain or loss, Annualized ROI (CAGR) normalizes performance across multi-year holding periods to enable fair comparisons.
Core Mathematical Formulas
- Net Profit / Gain:
Net Gain = Final Amount Returned - Initial Investment - Total ROI%:
ROI = (Net Gain / Initial Investment) × 100 - Annualized ROI% (CAGR):
Annualized ROI = [ (Final Amount / Initial Investment)^(1 / Years) - 1 ] × 100
Worked Example
An initial investment of $25,000.00 returned $42,500.00 after a holding period of 4 years:
1. Net Gain = $42,500.00 - $25,000.00 = $17,500.00
2. Total Cumulative ROI = ($17,500.00 / $25,000.00) × 100 = 70.00%
3. Annualized ROI = [ ($42,500 / $25,000)^(1 / 4) - 1 ] × 100 = 14.19% per year
Assumptions & Limitations
Total ROI does not reflect holding time; a 50% ROI over 1 year is vastly superior to a 50% ROI over 10 years. Annualized ROI assumes compound growth across the duration and ignores intermittent dividend cash flows or capital gains tax events.