ROI calculator
A total return is hard to compare when projects run for different lengths of time. Enter the investment, final value, and months held to see both simple ROI and a comparable annualized rate.
Inputs and formulas
- Initial investment: the cash committed at the start.
- Final value or return: the value received at the end; enter a lower value for a loss.
- Time period: months the investment was held.
- Net return = final value − investment; ROI = net return ÷ investment; annualized ROI = (1 + ROI)^(12 ÷ months) − 1.
Worked example
An investment of $5,000 that produces a $12,000 final value has a $7,000 net return and 140% total ROI. Over 12 months, its annualized ROI is also 140%; the same total return over 24 months would annualize to about 54.9%.
Caveats and next decision
ROI is not cash-flow forecasting and the annualized formula assumes one initial outflow and one final value. It excludes taxes, financing cost, risk, interim cash flows, and the value of management time. A negative final value relative to the investment can be modeled, but annualization is not meaningful when the net result is a total loss that makes the growth base non-positive.
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