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> If you have a grocery store and you sell $100 of fruit, maybe $1 is profit. It makes sense to say you have a 1% return on investment. Return on investment is
by kgwgk 7y ago
> If you have a grocery store and you sell $100 of fruit, maybe $1 is profit. It makes sense to say you have a 1% return on investment.
Return on investment is something else. A grocery store will have sales well above the invested capital. The profit margin may be low-single-digit while ROI is double-digit.
- brownbat 7y agoGood catch, most sources and the link I included hold ROI as equivalent to ROA, and distinguish it from profit margin. I was trying to shift to a lay voice in that bit and in the process totally misused one of the terms of art under discussion, was a bad oversight on my part. I think my general explanation stands as to why we might want to shift between ROA/ROI and profit margin when comparing different industries though.