How to calculate return on investment (ROI)?

Return on Investment (ROI) is calculated by subtracting the initial cost of the investment from its current value (or selling price), dividing the result by the initial cost, and multiplying by 100. It measures the efficiency or profitability of an investment relative to its cost.

Formula

ROI % = ((Current Value − Cost of Investment) ÷ Cost of Investment) × 100

Worked Example

You buy stock for $1,000 and sell it for $1,200:

1. Net Profit: $1,200 − $1,000 = $200
2. Efficiency: $200 ÷ $1,000 = 0.20
3. ROI: 0.20 × 100 = 20%

Result: Your return on investment is 20%.