What is ROI and how is it calculated?

ROI (Return on Investment) measures the profitability of an investment. Formula: ROI = (Net Return ÷ Initial Investment) × 100. For example, if you invest ₹1,00,000 and earn ₹1,40,000 back, Net Return = ₹40,000 and ROI = 40%. A positive ROI means the investment made money; negative means it lost money.

What is CAGR and how is it different from ROI?

CAGR (Compound Annual Growth Rate) shows the annual growth rate of an investment over multiple years, assuming profits are reinvested each year. Formula: CAGR = (Final Value ÷ Initial Value)^(1÷Years) - 1. Example: ₹1L growing to ₹2.5L in 5 years gives CAGR = 20.1%. CAGR is better than total ROI when comparing investments of different durations.

What is a good ROI for a business in India?

A good ROI depends on the business type and risk. General benchmarks: Real estate 8–15% CAGR, Equity/Mutual Funds 12–15% long-term, Fixed Deposits 6.5–7.5%, SME businesses 20–30% ROI on capital employed. If your business ROI is below the cost of capital (bank loan rate), the business is not creating value.

What is Marketing ROI (ROAS)?

Marketing ROI measures how much gross profit was generated for every rupee spent on marketing. Formula: Marketing ROI = (Revenue - COGS - Marketing Spend) ÷ Marketing Spend × 100. ROAS (Return on Ad Spend) = Revenue ÷ Marketing Spend. A Marketing ROI of 100% means you broke even. A healthy marketing ROI is typically 200–400%.

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ROI Benchmarks for Indian Businesses

Investment Type	Expected ROI / CAGR	Risk Level
Bank Fixed Deposit	6.5–7.5% p.a.	Zero risk
PPF / Government Bonds	7.1–7.5% p.a.	Zero risk
Equity Mutual Funds	12–15% CAGR (10yr)	Market risk
Real Estate (Tier-1 cities)	8–12% CAGR	Low-medium
SME Business	20–40% ROI on capital	Business risk

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"Payback period calculation is the feature I needed. Showed our equipment investment would pay back in 18 months — made the decision easy."

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Frequently Asked Questions

How is ROI calculated?+

ROI = (Net Return ÷ Initial Investment) × 100. Net Return = Final Value − Initial Investment. Example: Invest ₹1,00,000, get back ₹1,40,000 → Net Return = ₹40,000 → ROI = 40%. A positive ROI means profit; negative means loss.

What is the difference between ROI and CAGR?+

ROI is the total percentage return regardless of time. CAGR is the annual growth rate assuming compounding. Use ROI for single transactions; use CAGR to compare investments of different durations. A 100% ROI over 5 years = 14.87% CAGR (not 20% simple annual).

What is a good marketing ROI in India?+

A healthy marketing ROI is 200–400% (for every ₹100 spent on marketing, ₹200–400 gross profit generated). ROAS of 3–5× is considered good for digital ads. Break-even is 100% ROI. Below 100% means marketing costs exceed gross profit — review spend allocation.

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