Financial Statement Analysis
 Ratio Analysis of Financial Statements (Formula, Types, Excel)
 Ratio Analysis Advantages
 Ratio Analysis
 Liquidity Ratios
 Cash Ratio
 Cash Ratio Formula
 Quick Ratio
 Quick Ratio Formula
 Current Ratio
 Current Ratio Formula
 Acid Test Ratio Formula
 Defensive Interval Ratio
 Working Capital Ratio
 Working Capital Formula
 Net Working Capital Formula
 Changes in Net Working Capital
 Cash Flow from Operations Ratio
 Cash Reserve Ratio
 Operating Cycle Formula
 Current Ratio vs Quick Ratio
 Bid Ask Spread
 Liquidity vs Solvency
 Liquidity
 Solvency
 Solvency Ratios
 Equity Ratio
 Capital Adequacy Ratio
 Liquidity Risk
 Altman Z Score
 Turnover Ratios
 Inventory Turnover Ratio
 Accounts Receivable Turnover
 Accounts Receivables Turnover Ratio
 Accounts Payable Turnover Ratio
 Days Inventory Outstanding
 Days in Inventory
 Days Sales Outstanding
 Average Collection Period
 Days Payable Outstanding
 Cash Conversion Cycle
 Cash Conversion Cycle (CCC) Formula
 Fixed Asset Turnover Ratio Formula
 Debtor Days Formula
 Working Capital Turnover Ratio
 Profitability Ratios
 Profitability Ratios Formula
 Common Size Income Statement
 Vertical Analysis of Income Statement
 Profit Margin
 Gross Profit Margin Formula
 Gross Profit Percentage
 Operating Profit Margin Formula
 EBIT Margin Formula
 Operating Income Formula
 Net Profit Margin Formula
 EBIDTA Margin
 Degree of Operating Leverage Formula (DOL)
 NOPAT Formula
 OIBDA
 Earnings Per Share
 Basic EPS
 Diluted EPS
 Basic EPS vs Diluted EPS
 Return on Equity (ROE)
 Return on Capital Employed (ROCE)
 Return on Invested Capital (ROIC)
 Return on Sales
 ROIC Formula (Return on Invested Capital)
 Return on Investment Formula (ROI)
 ROIC vs ROCE
 ROE vs ROA
 CFROI
 Cash on Cash Return
 Return on Total Assets (ROA)
 Return on Average Capital Employed
 Capital employed Employed
 Return on Average Assets (ROAA)
 Return on Average Equity (ROAE)
 Return on Assets Formula
 Return on Equity Formula
 DuPont Formula
 Net Interest Margin Formula
 Earnings Per Share Formula
 Diluted EPS Formula
 Contribution Margin Formula
 Unit Contribution Margin
 Revenue Per Employee Ratio
 Operating Leverage
 EBIT vs EBITDA
 EBITDAR
 Capital Gains Yield
 Tax Equivalent Yield
 LTM Revenue
 Operating Expense Ratio Formula
 Overhead Ratio Formula
 Variable Costing Formula
 Capitalization Rate
 Cap Rate Formula
 Comparative Income Statement
 Capacity Utilization Rate Formula
 Total Expense Ratio Formula
 Efficiency Ratios
 Dividend Ratios
 Debt Ratios
 Debt to Equity Ratio
 Debt Coverage Ratio
 Debt Ratio
 Debt to Asset Ratio Formula
 Coverage Ratio
 Coverage Ratio Formula
 Debt to Income Ratio Formula (DTI)
 Capital Gearing Ratio
 Capitalization Ratio
 Interest Coverage Ratio
 Times Interest Earned Ratio
 Debt Service Coverage Ratio (DSCR)
 DSCR Formula (Debt service coverage ratio)
 Financial Leverage Ratio
 Financial Leverage Formula
 Degree of Financial Leverage Formula
 Net Debt Formula
 Leverage Ratios
 Leverage Ratios Formula
 Operating Leverage vs Financial Leverage
 Current Yield
 Debt Yield Ratio
 Solvency Ratio Formula
Return on Investment Formula – Table of Contents
What is Return on Investment Formula?
Return on investment measures the gain or loss made on an investment relative to the amount invested. ROI is financial ratio used to calculate the benefit of the investor with reference to their investment cost mostly measured as net income divided by the original capital cost of investment. So, the Return on investment calculation is done to analyze the performance of investment
The Return on Investment (ROI) formula is represented as –
In general, the Return on Investment formula is equal to net profit upon the cost of investment.
ROI formula is flexible and used by the different investor to compare ROI on different potential investments and return on stocks.
Examples of Return on Investment(ROI) Formula
Let’s see some simple to advanced example to understand the calculation of Return on Investment Equation Better.
Example #1
An investor buys $10,000 of stocks and sells the shares 1 year later with amount $12,000. The net profit from an investment is $2,000 and ROI is as follows:
 Return on Investment
So from the above calculation of Return on Investment will be:
This is actual profit including taxes and fees.
The (Return on Investment) ROI formula can be written as:
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“Gain from investment” refer to sales of investment interest. Return on investment formula is measured as a percentage, it can be easily compared with returns from other investments, allowing one to measure a variety of types of investment against one another.
Hence, return on investment is a difference of gain from investment and cost of investment upon the total cost of investment
Example #2
An investor invested $15,000 and sell same after a few years and he sells same at $20,000. Then, ROI will be as follows
 Return On Investment
So from the above calculation of Return on Investment will be:
Example #3
Suppose an investor invests $1000 in the bakery in 2015 and sold his stock in 2016 at $1200. Then, ROI Formula will be as follows:
ROI _{Bakery }= (12001000) * 100 / 1000 = 20%
He also invested $2000 in the shoe business in 2015 and sold his stock in 2016 at $2800 then ROI Formula will be as follows:
ROI _{Shoes_Business }= (28002000) * 100 / 2000 = 40%
So, through ROI one can calculate the best investment option available. We can see that investor book more profit in the business of Shoes as the return on investment is shoe business is higher than the bakery business.
Top 4 Methods to Calculate Return on Investment (ROI)
There are total four methods to calculate return on investment calculation.
Now, let us the calculation of ROI formula with below methods:
#1 – Net Income Method
ROI formula = (Net Income / Investment value) * 100
#2 – Capital Gain Method
ROI Formula = (Current Share Price – Original Share Price) * 100 / Original Share Price
#3 – Total Return Method
ROI Formula = (Current Share Price + Total Dividends Received – Original Share Price) * 100 /Original Share Price
#4 – Annualized ROI Method
ROI Formula = [(Ending value / Beginning value) ^ (1 / no. of years)] – 1
Return on Investment Formula Calculator
You can use the following Return on Investment Formula calculator
Net Profit  
Cost of Investment  
ROI Formula =  
ROI Formula = 



Relevance and Uses of Return on Investment (ROI) Formula
 Return on investment formula is used in finance by corporates in any form of investment like assets, projects etc.
 ROI Formula measure return on investment like return on assets, return on capital etc.
Benefits of Return on Investment (ROI) Formula are as follows:
 Simple and easy to understand ROI Formula is easy to calculate and it can be calculated by two figures that are benefit and cost.
 Universally understood ROI Formula is very popular and commonly used.
Limitations
 Susceptible to Manipulate ROI Formula calculation differs based on investor some consider one aspect and others ignore it so it can be manipulated easily.
 Disregards the factor of time The investor needs to compare two instruments under the same time period and same circumstances. ROI is not dependent on time hence we cannot see the impact of time period through this.
Recommended Articles
This has been a guide to Return on Investment Formula. Here we discuss how to calculate Return on Investment (ROI) using practical examples along with downloadable excel templates. You may learn more about Financial Analysis from the following articles –
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