ROI (Return on Investment) Calculator – Simple Explanation
What It Does
Calculates the profit or loss earned on an investment relative to its cost, expressed as a percentage. Helps compare different investments.
Key Terms
Initial Investment: Amount of money invested (e.g., ₹50,000).
Final Value: Current or selling value of the investment (e.g., ₹70,000).
Net Profit: Final Value – Initial Investment (e.g., ₹20,000).
ROI (%): Measures efficiency of the investment.
Formula
ROI(%)=(Final Value−Initial InvestmentInitial Investment)×100ROI(%)=(Initial InvestmentFinal Value−Initial Investment)×100
Example
Initial Investment: ₹1,00,000
Final Value (after 2 years): ₹1,30,000
ROI Calculation:ROI=(1,30,000−1,00,0001,00,000)×100=30%ROI=(1,00,0001,30,000−1,00,000)×100=30%→ You earned a 30% return on your investment.
When to Use It?
✔ Comparing stocks, real estate, or business projects.
✔ Measuring marketing campaign success.
✔ Evaluating long-term vs. short-term investments.
Limitations
✖ Ignores time (a 30% ROI in 1 year is better than in 5 years).
✖ Doesn’t account for risk (higher ROI may mean higher risk).
