ROI (Return on Investment) = (Net Profit ÷ Investment Cost) × 100. It measures the gain or loss from an investment relative to its cost.
It depends on the investment type and risk. For retail business investments, 20–40% annual ROI is considered good. Risk-free investments (FDs) yield 6–7%.
Margin = profit as % of revenue. ROI = profit as % of investment made. A business can have 10% margin but 50% ROI if it uses capital efficiently.
If an investment is held for more or less than a year, annualise: Annualised ROI = ((1 + ROI/100)^(12/months) − 1) × 100.
