About the ROI Calculator
Return on investment is the simplest test of whether money was well spent: what came back, compared with what went in. It works for a new machine, a marketing campaign, a shop renovation, a plot of land or a mutual fund. Enter the amount invested and the amount returned, and the calculator shows the net gain and the ROI as a percentage.
Total ROI alone can mislead, because it ignores time. Earning 60% in three years is very different from earning 60% in ten. The annualised ROI converts the total return into the steady yearly rate that would have produced the same result with compounding — the same idea as CAGR — so that investments held for different periods can be compared fairly.
For a business decision, count everything that went in, including installation, training and working capital, and everything that came back, including extra profit earned and resale value. The calculator does not adjust for tax, inflation or the timing of cash flows in between; for projects with uneven yearly cash flows, a bank or investor will ask for IRR as well.
How to use it
- 1Enter the total amount invested, including one-time costs linked to the investment.
- 2Enter the total amount returned — the final value plus any income received along the way.
- 3Enter the holding period in years; use decimals for part years, such as 1.5 for eighteen months.
- 4Compare the annualised ROI, not just the total ROI, with your loan interest rate or with other options.
How this is calculated
Net gain = Amount returned − Amount invested ROI % = Net gain ÷ Amount invested × 100 Annualised ROI % = [(Amount returned ÷ Amount invested)^(1 ÷ years) − 1] × 100
Frequently asked questions
What is a good ROI for a small business investment?
A useful benchmark is your cost of money. If a loan costs 11% a year, an investment should be expected to return comfortably more than that on an annualised basis, with a cushion for risk. Compare against what the same money could safely earn elsewhere, rather than against a universal number.
What is the difference between ROI and annualised ROI?
ROI is the total percentage gain over the whole period, however long it was. Annualised ROI is the compound yearly rate that gives the same result. ₹5 lakh growing to ₹8 lakh is a 60% ROI; over three years that is about 17% a year, but over six years it is only about 8% a year.
Is annualised ROI the same as CAGR?
Yes, for a single amount invested at the start and a single value at the end, the two are calculated the same way. CAGR is the term normally used for growth in sales, profit or fund values, while annualised ROI is used for a specific investment. Neither captures money added or withdrawn in between.
Can ROI be negative?
Yes. If the amount returned is lower than the amount invested, the net gain is negative and so is the ROI. An investment of ₹5 lakh that returns ₹4 lakh has an ROI of −20%. The lowest possible figure is −100%, which means the entire investment was lost.
How do subsidies and grants affect ROI?
A capital subsidy reduces the amount you effectively invest, so the same returns produce a higher ROI. If a ₹10 lakh machine attracts a ₹2.5 lakh subsidy, measure the returns against ₹7.5 lakh. It is worth checking scheme eligibility before finalising a purchase, since some subsidies must be applied for in advance.