Business formula

ROI Formula

Learn the return on investment formula and how gain or loss is measured relative to the amount invested.

FormulaROI % = ((final value − investment) ÷ investment) × 100

What the formula means.

Subtract the original investment from the final value to find gain or loss, then divide by the original investment and convert the ratio to a percentage.

ROI does not include time unless you annualize it separately.

Use consistent definitions for what counts as investment and final value.

A negative ROI represents a modeled loss.

Variables.

I

Investment

The original amount committed.

F

Final value

The ending value included in the comparison.

ROI

Return on investment

Gain or loss relative to the original investment.

Worked example.

$10,000 becomes $12,500

$12,500 − $10,000 = $2,500 gain
$2,500 ÷ $10,000 = 0.25
0.25 × 100 = 25%

ROI is 25%.

Try your own numbersROI Calculator

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Common mistakes.

Comparing ROI across very different time periods without context.
Using revenue as final value while ignoring costs.
Confusing ROI with ROAS, which focuses on ad spend and attributed revenue.

Quick questions.

Is ROI annualized?

Not by this basic formula. It measures total return over the period represented by the inputs.

Can ROI be negative?

Yes. If final value is below the original investment, ROI is negative.