How ROI is Calculated

Return on investment (ROI) is one of the most widely used financial metrics. It measures how much profit or loss you earned relative to how much you spent. ROI is expressed as a percentage, making it easy to compare the performance of different investments regardless of their size. Whether you are evaluating a stock purchase, a marketing campaign, a real estate deal, or a business expansion, ROI gives you a single number to assess the outcome.

Annualized ROI (CAGR)

Basic ROI does not account for time. A 50% return over 1 year is very different from a 50% return over 10 years. Annualized ROI, also known as Compound Annual Growth Rate (CAGR), converts your total return into an equivalent yearly rate. This lets you make fair comparisons between investments held for different durations. A 3-year investment that returned 34.75% total has a CAGR of about 10.5% per year.

Investment Multiple (MOIC)

The investment multiple, or Multiple on Invested Capital, shows your final value as a ratio of your total cost. A 1.35x multiple means every dollar you invested became $1.35. Multiples below 1.0x indicate a loss. This metric is commonly used in venture capital and private equity to communicate returns in a straightforward way.

Why Costs Matter

Always include fees, commissions, transaction costs, and any related expenses when calculating ROI. Excluding these costs overstates your actual performance. For example, a real estate investment that returned $5,000 profit on a $200,000 purchase looks positive until you add $18,000 in renovation costs — turning the deal into a net loss. This calculator includes an Additional Costs field so your ROI reflects what you actually earned.