Simple ROI formula and example
Simple ROI is (total returns − investment cost) / investment cost × 100. A positive figure indicates profit relative to cost; a negative figure indicates loss. Include relevant expenses in the cost if you want to compare alternatives on the same basis.
For instance, a $1,000 cost and $1,200 in proceeds imply $200 profit and a simple ROI of 20%. The tool does not annualise returns or model tax, fees, inflation, changing cash flows, risk or the time value of money.
Frequently asked questions
Is simple ROI the same as annualised return?
No. It does not adjust for the length of the investment period.
Can ROI be negative?
Yes, when total returns are lower than the cost.