ROI Calculator
Easily assess the returns on your investments
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What is ROI?
ROI stands for 'Return on Investment,' which is a financial metric used to measure the profitability or effectiveness of an investment. In simple terms, it tells you how much profit or value you gained (or lost) relative to the amount of money you initially invested.
What is an ROI Calculator?
An ROI Calculator is a handy tool that figures out how much money you can make from a business choice. You put in costs and potential earnings, and it shows you the percentage or amount of profit you might get, helping you decide if it's a smart investment.
How to Calculate ROI using Razorpay ROI Calculator
The Razorpay ROI Calculator allows you to determine the return on your investments with ease. To utilize the Razorpay ROI Calculator effectively, follow these simple step
Input the Investment Amount: Begin by entering the total amount you have invested.
Enter the Returned Amount: Next, input the amount that you have received as a return on your investment.
Set the Duration of Investment: Specify the holding period of your investment, indicating the duration for which you held the investment.
Select your business Type: Choose the appropriate business type or category that best describes the nature of the investment.
Analyze Your Investment Gain: The Razorpay ROI Calculator will swiftly display the gain on your investment
ROI Formula
The ROI formula is as follows:
Absolute ROI is a way to see how well your investments performed in a short period, like less than a year.
To find the absolute return, you can use a specific formula: ROI = (Net Profit / Initial Investment )* 100
Here, Net Profit refers to the final value of your investment minus the initial value of your investment.
Let’s say that you invested Rs.30,000 and earned Rs.60,000. Then, ROI = ((60,000-30,000)/30,000)*100
ROI = 100%
ROI Formula
Annualized ROI:
The annualized return is figured out by looking at how well the investment did over different time periods, using a specific formula to find the result.
Here's the formula for calculating the annualized return on investment (ROI). It takes into account the compounding effect of interest.
Annualized ROI = [(Total return/Initial Investment) ^ (1/Holding Period)] - 1
Let's say that you invested Rs.30,000 and earned Rs.60,000 back at the end of five years. In this case, Annualized ROI = [(60,000/30,000)^(⅕)] - 1
Annualized ROI = 0.14869 = 14.87%
How Does ROI Calculation Help you?
ROI calculation can also be useful when it comes to evaluating the profitability and suitability of an investment. Considering ROI with respect to their individual financial goals and risk tolerance can enable investors to make the right decisions. Evaluating an investment based on its ROI helps investors to:
Determine Profitability: ROI enables investors to gauge potential profitability and ascertain whether an investment aligns with their financial goals, such as generating profit or meeting income targets.
Quantify Returns: Using ROI as a standardized metric, investors can compare the returns of different investments, facilitating the prioritization of opportunities with the best potential returns.
Account for Risk: While ROI is essential for assessing returns, it does not consider associated risks. Considering risk tolerance alongside ROI helps investors evaluate the level of risk they are comfortable taking on to achieve their financial objectives.
Using a calculator, we can find that 1.5 raised to the power of 1/3 is approximately 1.1447. CAGR = 1.1447 - 1
Therefore, the CAGR for the company's revenue growth over the three-year period is approximately 14.47%.
What is a Good ROI?
For an investor, what qualifies as a good ROI depends on a number of factors such as the risk appetite, the end goal, and the investment horizon. If you are an investor, you need to ask yourself a few questions:
How much risk can I afford to take?
How much profit do I want to make from this investment?
Do I want long-term returns or am I only invested for the next one year?
Is there an opportunity cost? That is, what are you missing out on - What returns would you get if you invested your money elsewhere?
In the stock market, most investors will view an average annual rate of return of 10% as a good investment. In the US, the S&P 500 (an index of the 500 leading publicly traded companies) has historically generated an average return of 10%. In India, the Nifty 50 has delivered an annual return of 10.65% over the last 15 years and around 13% over the last 10 years.
Benefits of using ROI Calculator
Efficiency: ROI calculators save time and effort by quickly evaluating investments.
Objectivity: Data-driven calculations reduce emotional biases for objective decisions.
Comparison: Easily prioritize investments based on potential returns.
Risk Assessment: Evaluate investment risk with cost and return analysis.
Resource Allocation: Efficiently allocate resources to high-return projects.
