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.
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.