How to Calculate ROI (Return on Investment) the Right Way
ROI is the simplest measure of whether an investment paid off. Here's the formula, a worked example, and the one thing people forget when comparing returns.
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What ROI measures
Return on investment (ROI) tells you how much profit an investment generated relative to its cost, as a percentage. It's the quickest way to compare options — a marketing campaign, a new machine, a hire. The free ROI Calculator does the maths for you.
The formula
ROI = (amount returned − amount invested) ÷ amount invested × 100.
Invest AED 10,000 and get back AED 13,000, and your ROI is 30%. The net return is AED 3,000.
The thing people forget: time
A 30% ROI over one month is spectacular; over five years it's modest. Always note the time period, and when comparing investments of different lengths, think in annualised terms. ROI alone doesn't capture risk or timing — use it alongside, not instead of, judgement.
Where ROI is useful
- Comparing marketing channels by return.
- Justifying equipment or software purchases.
- Evaluating whether a project beat its cost of capital.
To know your true returns you need clean numbers on costs and revenue — exactly what Pyalm Books keeps organised. You can also pair ROI with the Business Valuation Calculator.