The chain works like this: budget ÷ CPC = clicks; the share of those clicks matching your conversion rate turns into sales, and sales × average order value gives revenue. Revenue over budget is ROAS, while net gain over budget is ROI.
It matters not to confuse ROAS with ROI: a 4x ROAS looks impressive, but once agency fees, creative and tool costs are added the net ROI comes out lower. On products with thin margins even a high ROAS can mean a loss, which is why your target ROAS has to be set against your profit margin.
Take your CPC and conversion rate from your own account data; they vary widely by sector and by how competitive your keywords are. To understand how the advertising model works more closely, see our Google Ads page.
