Article · ~10 min read

Return on Investment: Formula, Meaning, and How to Calculate It

Corporate Finance Institute · corporatefinanceinstitute.com Free Beginner

Explains the ROI formula, works an example, shows how to annualise ROI so investments of different lengths compare fairly, and lists its limits.

  • ROI = (gain from investment - cost of investment) / cost of investment x 100.
  • Annualise ROI when comparing investments held for different lengths of time.
  • ROI ignores risk and timing, so use it with payback period for marketing spend.
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The question it answers

  1. How do I calculate profit margin and ROI?

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