ROI calculator:
find out what your money really earned

What ROI tells you

ROI, or return on investment, is the profit on an investment expressed as a percentage of what you put in. An ROI of 30% means that for every ₹100 invested you ended up ₹30 better off after costs.

It is popular because it works on anything with a cost and a payoff: a mutual fund, a shop renovation, a course, a machine, a marketing campaign. That also makes it easy to misuse, because the number says nothing about how long the money was tied up or how risky the bet was.

It is also a fast filter. Before spending time on a detailed plan, a quick ROI estimate tells you whether an idea can possibly be worth the effort once costs are counted.

Use ROI to compare outcomes that are similar in size and duration. When time horizons differ, convert to an annual rate first, which is covered below.

ROI formula

1. 1Add up everything you put in: purchase price, fees, taxes and set-up costs.
2. 2Add up everything you got back: sale proceeds, dividends, rent or other income.
3. 3Subtract the first from the second to get net gain.
4. 4Divide by the cost and multiply by 100.

You will also see returns quoted as a multiple. A multiple is simply 1 + ROI: a 30% ROI is a 1.3× return, and a 100% ROI means you doubled your money. Converting between the two takes a second and avoids confusion when a pitch uses one and your spreadsheet uses the other.

A negative result is a loss. Put the minus sign in, because a −12% ROI is as informative as a +12% one.

Worked example: new equipment for a small tailoring unit

Both answers are legitimate, so state your definition. What matters is that you use the same one for every option you compare, otherwise the ranking can change.

The same arithmetic works for a share purchase. Buy for ₹1,20,000, sell for ₹1,38,000, receive ₹3,000 in dividends and pay ₹1,500 in brokerage and charges: net gain is ₹19,500 and ROI is 16.25%.

What counts as cost and gain in different situations

The formula never changes; what changes is which rupees you put in each column. Getting that list right is most of the work.

For an ad campaign, use contribution profit rather than revenue. If a ₹50,000 campaign produced ₹1,50,000 of sales at a 40% gross margin, the gain is ₹60,000 and the ROI is (60,000 − 50,000) ÷ 50,000 = 20%, not 200%.

Why the time period changes the answer

A 30% ROI over one year is excellent. The same 30% over five years is mediocre. ROI cannot tell these apart, but the annualised rate (also called CAGR) can.

The tailoring unit above has a 30% ROI over three years, which is about 9.1% a year. That is the figure to put beside a fixed deposit, a bond or an index fund when deciding where to put the next ₹3 lakh.

A quick way to feel the annual rate is the rule of 72: divide 72 by the annual percentage to estimate the years needed to double. At about 9.1% a year that is roughly 7.9 years.

Reading the result: what is a good ROI?

Two more measures are worth pairing with ROI. The first is the payback period: how many months until the cumulative gain covers the cost. The second is the size of the loss if things go badly. Two options with identical ROI are not equal if one can lose everything.

There is no universal good ROI. The right comparison is the best alternative you could have used that money for, adjusted for risk and time. A 9% annual return is poor next to a risk-free option that pays more, and excellent next to one that pays less.

Inflation matters too. If prices rise 5% a year over the same three years, a 30% total return is about 12.3% in real terms: 1.30 ÷ 1.05³ − 1. That is an illustration at an assumed 5% inflation rate, not a forecast.

Here is how a headline ROI can mislead. Option A turns ₹5,00,000 into ₹6,00,000 in one year: ROI 20%. Option B turns ₹5,00,000 into ₹7,00,000 in four years: ROI 40%. Option B looks twice as good, but annualised it is about 8.8% a year against 20% a year for A.

The picture is not complete without risk, though. If Option A needs you to find a fresh opportunity every year, the comparison depends on whether you can keep earning 20% when you reinvest. Always ask what happens to the money after the period ends.

• Compare ROI across options only on the same time basis, preferably annualised.
• Compare it with a realistic alternative, not with zero.
• Ask what could go wrong: a high ROI on one customer or one tenant is fragile.
• Keep ROI for decisions and use absolute profit to plan cash flow.

ROI mistakes to avoid

• Leaving out costs. Brokerage, stamp duty, taxes, repairs and your own time reduce the real return.
• Mixing up ROI and profit margin. Margin divides profit by revenue; ROI divides it by the money invested.
• Ignoring when the cash arrived. ₹1,00,000 received in year one is worth more than the same amount in year five.
• Judging only winners. Reporting the ROI of the investments that worked and forgetting the ones that did not.
• Treating ROI as certain. It describes a result that has already happened, not a promise.

ROI also breaks down when money goes in at several dates, as in a monthly SIP or a project paid in instalments. Dividing by total money invested ignores that some rupees were invested for years and others for weeks. For staggered cash flows use an XIRR-style measure, which weights each payment by its date.

For a smooth annual growth rate between a starting and an ending value, use the CAGR calculator. For compounding over many years, see the compound interest guide.