ROI Calculator

One number, many reads

Return on investment is probably the most quoted and least annotated figure in planning conversations: (final − initial) ÷ initial × 100. This page computes the percentage and the absolute profit or loss side by side, because those two numbers never travel without each other. A 30% ROI on 1,800 invested (closing at 2,340) is a 540 gain; on 180 invested (closing at 234) the same percentage is 54 — real money decisions move with the absolute figure, the percentage alone just ranks them.

What ROI deliberately leaves out: time. 30% in one year and 30% across five years are different achievements, and the honest fix is annualising on a second pass. The CAGR Calculator does exactly that: it converts the same journey into one steady yearly rate, which then compares unequally spaced projects on equal terms. Use ROI for a single-amplitude verdict, CAGR for the verdict you will defend in a meeting.

A worked example, step by step

Problem: 1,800 put into equipment that later resells for 2,340. ROI?

1. Profit: 2,340 − 1,800 = 540.
2. Base: the initial 1,800 — what was actually at risk.
3. Divide: 540 ÷ 1,800 = 0.30.
4. Convert: × 100 = +30% ROI.
5. Sense-check: a third of 1,800 is 600 and 540 is slightly below, so 30% rather than 53% is correct.

Now annotate time: over 2 years the annualised figure is 1.3^(1/2) − 1 = 14.02% a year; over 4 years it would be 6.78%; over 8 years, 3.33%. The story improves or deteriorates depending on how long the money worked, and only the annualised numbers are fair to compare across projects.

The same +30% ROI at different horizons

The ROI figure never changes; the verdict does — which is why "ROI of 30%" without a duration is a headline, not a metric.

From the number to the decision

Beyond the pair of figures, three bookkeeping choices decide what a ROI claim actually measures — settle them before sharing. Realized versus held: a resold asset at 2,340 closes the question, while a position still worth 2,340 depends on the market holding; the calculator cannot tell which kind it counted, so label it yourself. Direct versus borrowed: if any of the 1,800 arrived through credit, the honest denominator is the total capital at risk plus the cost of the borrowing, not the tidy headline figure. Cash-only: anything not converted into money back — the workshop space you would have rented anyway — flatters the story unless you consciously choose the cash view and say so in the note.

Then put the horizon where it belongs, immediately: the same 30% over two years is an annualised 14.02%, over four years 6.78%, and the CAGR Calculator prices the equivalent steady rate for the horizon you choose. That annualised figure is what makes different-duration projects comparable, while an unqualified ROI remains a period snapshot. And quote both currencies that matter together: the absolute profit (540) answers the cash question, the relative return (+30%) answers the ranking question — the strongest internal case carries the two, with the dates, in one sentence.

Mistakes that flatter the ROI

• Comparing different durations. Two projects with +25% one year and +25% over five years are not peers; annualise before ranking.
• Using the final value as the base (accidentally). Divide by what you put in, not what you ended with, otherwise gains shrink and losses deepen.
• Excluding the money "stuck" along the way. If 400 was borrowed into the project, the invested figure is 1,800 plus what it cost, not just the clean 1,800.
• Ignoring fees and taxes. Transaction costs and taxes both reduce "final value"; leave them in a second pass and compare both views.
• Demanding ROI decide strategy. A single-return number is an accounting fact; the decision adds liquidity, effort and your actual risk appetite.

Keep exploring

• CAGR Calculator — steady annual growth that makes horizons comparable.
• Profit Margin Calculator — profit as a share of revenue, not of invested capital.
• Compound Interest Calculator — what the same principal + rate + years produces when returns are forecast, not recorded.
• Guide: CAGR and Inflation Explained.
• Guide: Markup vs Margin.