ROI & Payback Period Calculator

Formulas

• Payback period = investment ÷ net cash flow per period
• ROI (%) = profit ÷ investment × 100
• If you enter the return (the amount before the investment is subtracted), the calculator uses profit = return − investment, subtracting the investment once, and then applies the same formula.

Amounts are handled as whole numbers of the smallest currency unit (for example, cents), with no floating-point numbers. The payback period and the ROI are each rounded once, at the end, to 2 decimal places (a value exactly halfway rounds away from zero). For a loss, the size is rounded first and the minus sign is added back. The "fully recovered in" period is rounded up from the exact ratio. The amounts shown (profit, return, investment) are the numbers you entered or their exact sums.

Unit of the amounts: the payback period and the ROI are ratios. If every amount uses the same unit (for example, cents instead of whole units, or thousands instead of units), the payback period and the ROI do not change. Mixing units would give a wrong result.

The results were checked against an independent calculation using whole-number arithmetic (about 4,000 cases, including amounts of 0.01 and the largest allowed amounts). All results matched exactly.

What each number means

Profit and cash flow are different

• Profit is an accounting figure: income minus costs. The price of equipment is not a cost of the year it is bought. It is spread over the years of use as depreciation.
• Cash flow is the real movement of cash. Depreciation is a cost in the accounts, but no cash leaves in that year.
• For example, you buy equipment for 1,000,000, and it adds 300,000 of cash every year (recovery = 300,000). The payback period is 1,000,000 ÷ 300,000 = about 3.33 years.
• If the depreciation is 200,000 a year, the accounting profit is 100,000 a year (300,000 − 200,000). Over 5 years the profit is 500,000, and the ROI is 50.00%.
• So the payback period (based on cash) and the ROI (based on profit) are different numbers. Enter net cash flow for the payback period, and profit (or return) for ROI.

How to read the payback period

• It is a simple calculation that assumes the same amount is recovered every period. Amounts that change from year to year are not handled.
• If the recovery is 0 or negative (cash decreases every period), the investment is never recovered, so the result is "Not available" with the reason.
• The payback period does not count profit after the investment is recovered. A short payback can still be followed by small profits, so look at ROI and total profit too.
• The time value of money is not considered. Discounted payback, net present value and internal rate of return are not covered.
• With months selected, the result is also shown in years and months (the number of months to recover the investment, rounded up, split into whole years).

How to read ROI

• ROI is the total profit over the whole period as a percentage of the investment. It is not a rate per year. When you compare options with different periods, make the periods the same first.
• ROI depends on how profit is defined (which costs are included). This calculator separates the profit entry from the return entry. If you enter the return as if it were the profit, you forget to subtract the investment, and the ROI becomes 100 percentage points too large.
• If the profit is negative (the return is less than the investment), the ROI is shown as negative with a note.
• ROAS (revenue ÷ ad spend) is a different measure: it uses revenue, not profit.

Examples

• Investment 10,000, recovery 500 a month → payback 20.00 months (1 year 8 months)
• Investment 10,000, recovery 3,000 a year → payback 3.33 years (fully recovered in year 4)
• Investment 10,000, profit 3,000 → ROI 30.00%
• Investment 10,000, return 13,000 → the profit is 3,000, so ROI 30.00% (the same as entering the profit)
• Investment 10,000, return 9,000 → the profit is −1,000, so ROI −10.00%

Edge cases

• An investment of 0 cannot be calculated (you cannot divide by 0).
• Enter amounts with up to 2 decimal places, up to 9,999,999,999.99 in size. The investment and the return are 0 or more; the recovery and the profit can be negative.
• Empty fields show "—".

What this calculator does not do

Calculations that use a discount rate (net present value, internal rate of return, discounted payback), yields and forecasts of financial products, automatic tax or depreciation calculations, and multi-year cash flows that change every year are not covered.

Notes

• The results are calculated from the numbers you enter. They do not predict or guarantee future income or results, and they are not financial advice.
• For the percentage change between two values, use the Percentage Change Calculator. For general percentages, use the Percentage Calculator.

Frequently asked questions

What is the difference between the payback period and ROI?

The payback period is how long it takes to get the investment back. ROI is the profit as a percentage of the investment. The payback period uses net cash flow, and ROI uses profit.

Are the recovery amount and the profit the same?

Not always. Depreciation, for example, is a cost in the accounts but does not use cash, so the net cash flow can be larger than the profit.

What is the difference between return and profit?

The return is the total income or amount recovered, before the investment is subtracted. The profit is what is left after the investment (and other costs) are subtracted. ROI = (return − investment) ÷ investment.

What if the amount recovered changes every year?

This calculator only handles the same amount every period. If the amounts change, check the cumulative total year by year by hand or in a spreadsheet.