Return on Investment (ROI) is a simple and commonly used metric that measures how profitable an investment is relative to its initial cost. It is expressed as a percentage and answers a basic question: How much did I earn compared to what I invested?
ROI works best for short-term or one-time investments where cash inflows and outflows are limited. It is widely used across finance, business, and even personal decision-making to evaluate efficiency and profitability.
For example, if you invest Rs. 1,00,000 in a fixed deposit and receive Rs. 1,10,000 at maturity, your ROI clearly reflects the gain earned on your original investment.
With Bajaj Finance Fixed Deposits, ROI is transparent and predictable, thanks to fixed interest rates locked in at the time of booking. Open an FD now and start earning up to 7.30% p.a.
ROI calculation formula
The ROI formula is simple and easy to apply:
ROI = (Net Profit / Investment Cost) × 100
Where:
Example:
If you invest Rs. 50,000 and receive Rs. 70,000 after one year, your net profit is Rs. 20,000.
ROI = (20,000 / 50,000) × 100 = 40%
This shows how much value your investment generated relative to its cost.
Fixed deposits with Bajaj Finance allow you to estimate ROI upfront using their FD calculator, making financial planning simpler.
What is Internal Rate of Return (IRR)?
Internal Rate of Return (IRR) measures the annualised rate at which an investment grows over time. Unlike ROI, IRR accounts for the time value of money, recognising that money earned sooner is worth more than money earned later.
IRR is particularly useful for long-term investments with multiple cash inflows across different periods—such as real estate projects or business ventures. It helps investors compare different opportunities on an annual growth basis.
Because of its complexity, IRR is mostly used in capital budgeting and project evaluation rather than everyday savings decisions.
For investors who prefer not to deal with complex return calculations, Bajaj Finance Fixed Deposits offer straightforward growth without the uncertainty of time-based cash flows. Start an FD account with as low as Rs. 15,000.
Internal rate of return (IRR) calculation formula
IRR is the discount rate at which the net present value (NPV) of all cash flows becomes zero.
NPV = ∑ [Ct / (1 + IRR)ᵗ] – C₀ = 0
Where:
Because this involves multiple variables and future cash flows, IRR is usually calculated using financial software or spreadsheets.
When to use return on investment vs. internal rate of return
Use ROI when:
ROI is best for short-term or simple investments where returns are received at maturity or in a single payout. It is ideal for evaluating fixed deposits, short-duration investments, or one-time financial decisions.
Use IRR when:
IRR is more suitable for long-term investments involving multiple cash flows over several years. It helps compare complex projects where timing significantly impacts returns.
Since Bajaj Finance Fixed Deposits have fixed tenures and assured payouts, ROI is often the most practical and reliable metric for evaluating them.
Book an FD and start earning an ROI of up to 7.30% p.a.
Differences between return on investment and internal rate of return
Calculation:
Use cases:
Time value of money:
