Return on Investment (ROI) Calculator
Return on Investment (ROI) is a universal profitability metric measuring the percentage gain or loss generated on an investment relative to its initial cost.
Sensitivity Analysis
Evaluate how variations in key operational drivers impact Return on Investment (ROI %).
| Sensitivity Case | Assumption Shift | Driver Value | Return on Investment (ROI %) | Impact vs Base |
|---|
Formula & Methodology
ROI (%) = ((Final Value - Initial Cost) / Initial Cost) * 100Initial CostTotal initial outlay including purchase price and associated fees.
Final ValueTotal liquidation proceeds plus any dividends or income collected.
YearsDuration investment was held.
Practical Worked Example
An entrepreneur invests Rs 2,00,000 into a business venture and exits 3 years later with Rs 3,50,000.
Interpretation & Industry Benchmarks
ROI provides an apples-to-apples comparison across real estate, stocks, venture capital, and personal projects.
Beats broad equity benchmark indexes.
Consistent with historical stock market indexes.
Underperforms equities but may carry lower risk.
Industry Nuance: Always compare annualized ROI rather than simple ROI when assessing investments with differing holding durations.
Analytical Limitations
- Does not adjust for risk or volatility encountered during the holding period.
Frequently Asked Questions
Why is annualized ROI better than total ROI?
A 50% ROI earned over 2 years (22.5% p.a.) is vastly superior to a 50% ROI earned over 10 years (4.1% p.a.). Annualized ROI reveals the true velocity of capital growth.