Calculate your return on investment (ROI) as a percentage. Compare business investments, marketing spends, and profitability on one scale.
ROI = (gain − cost) ÷ cost. It's the fastest way to compare unlike investments — a delivery van, a godown deposit, a marketing spend — on one scale. Its weakness is time-blindness: 20% over one year and 20% over four years score identically.
For anything longer than a year, annualise: ROI per year = (1 + total ROI)^(1/years) − 1. And compare against your true cost of capital — if working-capital credit costs you 15%, a 12% ROI project destroys value.
It must beat your cost of capital plus risk. With business credit at 12–18% in India, projects below ~20% annualised rarely justify the risk and effort of distribution expansion.
Margin measures profit per rupee of sales; ROI measures profit per rupee of capital invested. High-margin lines can still be poor ROI if they tie up disproportionate stock or credit.
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