ROI (Return on Investment) measures how much profit or loss you made relative to what you put in. It’s one of the simplest ways to compare two investments or business decisions.
The ROI formula
Formula
ROI (%) = ((Final Value − Initial Cost) / Initial Cost) × 100
How to read the result
- Positive ROI: you gained money relative to your cost.
- Negative ROI: you lost money on the investment.
- Higher ROI isn’t always “better” if risk, time, or liquidity differ.
A quick example
If you invest $5,000 and it grows to $6,200, your gain is $1,200. ROI = (1,200 / 5,000) × 100 = 24%.
Try it instantly
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