What percentage return did an investment produce relative to its cost?

Return on investment compares net gain with the amount invested. Keeping the cost in the denominator makes projects of different sizes comparable, but it does not account for how long the money was committed.

Measuring gain against invested cost

ROI compares the net gain or loss with everything spent to obtain it. Enter the initial investment, its final value and any additional costs that should count towards the total outlay.

The return multiple shows final value divided by total cost, while ROI expresses the net result as a percentage of that total cost.

The denominator that defines ROI

Total cost = Initial investment + Additional costsROI = [(Final value − Total cost) ÷ Total cost] × 100

One cost, one ending value

The default example takes one initial cost and one final value. It shows the gain in currency first, then expresses that gain as a percentage of the original cost.

ROI45%
Net profit$2,250.00
Total cost$5,000.00
Return multiple1.45x

Cash profit versus percentage efficiency

Use net profit to understand the money gained or lost and ROI to compare efficiency. Two investments can share the same ROI while producing very different cash profits.

Why ROI cannot compare time by itself

ROI is not an annual rate. Comparing a one-month return with a five-year return using ROI alone hides the difference in time.

  • The cost input represents all capital committed to the calculation.
  • The final value uses the same currency and valuation basis.
  • Interim cash flows and the timing of returns are not modelled.

Calculations related to roi

The following tools examine neighbouring parts of the same calculation without changing the inputs or assumptions used above.

Quick answers

Frequently asked questions

What should I include as an additional cost?

Include relevant fees, maintenance, transaction costs or other expenditure that forms part of the investment.

Does ROI account for time?

No. ROI measures total return without considering how long the investment was held; use CAGR for an annualised rate.

Can ROI be negative?

Yes. It is negative when final value is lower than the combined initial investment and additional costs.

Educational content only. This guide is not financial advice.