Question 1

What is ROI (Return on Investment)?

Accepted Answer

ROI (Return on Investment) is a performance metric that measures the profitability of an investment. It's expressed as a percentage and calculated by dividing the net profit by the initial cost. A positive ROI means you made money; a negative ROI means you lost money.

Question 2

How do I calculate ROI?

Accepted Answer

The basic ROI formula is: ROI = ((Gain - Cost) / Cost) × 100. For example, if you invested $10,000 and received $15,000: ROI = ((15000 - 10000) / 10000) × 100 = 50%. This means you made a 50% return on your investment.

Question 3

What is a good ROI?

Accepted Answer

A "good" ROI depends on the context. For stock market investments, 7-10% annually is considered good (historical S&P 500 average). For marketing campaigns, 5:1 (500% ROI) is excellent. Real estate often targets 8-12%. Always compare ROI to your industry benchmarks and risk level.

Question 4

What is the difference between ROI and ROAS?

Accepted Answer

ROI (Return on Investment) measures net profit as a percentage of cost. ROAS (Return on Ad Spend) measures revenue per dollar spent on ads. Example: $1,000 ad spend, $5,000 revenue, $2,000 COGS. ROAS = 5:1 ($5 revenue per $1 spent). ROI = 200% (($5000-$2000-$1000)/$1000).

Question 5

Is this ROI calculator free?

Accepted Answer

Yes, this ROI calculator is completely free with no limits. No registration or credit card required. All calculations are performed in your browser for maximum privacy.

Question 6

How do I calculate ROI in Excel?

Accepted Answer

In Excel, use the formula: =(B1-A1)/A1 where A1 is the cost and B1 is the gain. Format the result as a percentage. For marketing ROI with COGS: =(Revenue-COGS-Cost)/Cost. Example: =(5000-2000-1000)/1000 = 200%.

Question 7

What is annualized ROI?

Accepted Answer

Annualized ROI normalizes returns to a yearly basis, allowing comparison of investments with different time periods. Formula: ((1 + ROI)^(1/years) - 1) × 100. A 50% return over 2 years = 22.5% annualized. This is more accurate than dividing by years.

Question 8

Can ROI be negative?

Accepted Answer

Yes, a negative ROI means you lost money on the investment. For example, investing $10,000 and receiving only $8,000 back: ROI = ((8000-10000)/10000) × 100 = -20%. A -100% ROI means you lost your entire investment.

Question 9

How do I calculate marketing ROI?

Accepted Answer

Marketing ROI = (Revenue Generated - Marketing Cost) / Marketing Cost × 100. Include all costs: ads, tools, salaries. For accurate ROI, subtract cost of goods sold (COGS) from revenue first. Example: $50,000 revenue - $20,000 COGS - $10,000 marketing = $20,000 profit = 200% ROI.

Question 10

What are the limitations of ROI?

Accepted Answer

ROI doesn't account for: time value of money, risk level, opportunity cost, or non-financial benefits. A 50% ROI in 1 month is better than 50% in 5 years. High ROI might come with high risk. Use ROI alongside other metrics like NPV, IRR, and payback period.

Question 11

How do I compare investments with different time periods?

Accepted Answer

Use annualized ROI to compare investments over different time periods. Example: Investment A returned 30% in 1 year (30% annualized). Investment B returned 50% in 3 years (14.5% annualized). Despite lower total return, A has better annual performance.

Question 12

How is this different from ElyxAI?

Accepted Answer

This free calculator handles basic ROI calculations. ElyxAI is a powerful AI assistant that works directly in Excel to analyze multiple investments, create ROI dashboards, automate marketing analysis, and build complex financial models. Try ElyxAI free for 7 days!

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