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Are ROI and profit margin the same thing?

Asked 3 years ago

Return on investment and profit margin sounds like they are the same thing. Is this the case or are they different? I know that ROI deals with the investment value of a product, but is this not the same as when you calculate your profit margin?

Payton Lynn

Sunday, October 31, 2021

Profit margin is calculated by dividing the item price into cost and profit. On the contrary, ROI deals with the investment value of goods. The primary difference between ROI and profit margin is the percentage. Profit margin can never exceed 100%. In contrast, ROI can increase by more than 100%. Profit percentage and cost percentage always add up to 100%. If your product costs $45, and you sell it for $100. Then on this product, your profit is 55%, while your ROI is 122%.

Curt Cleveland

Wednesday, March 09, 2022

No, profit margin and return on investment (ROI) are different from each other. The ROI easily lets you know how much you'll get back from every coin you spend on inventory. While profit margin concentrates on what you invested in your inventory.

Is profit margin or ROI more important?

Neither is more important than the other since they are used differently by businesses.

Scottie Gordon

Wednesday, August 10, 2022

Return on Investment (ROI) and profit margin are not the same terminologies. Let's see how ROI and profit margin are calculated mathematically:

ROI = Profit / Cost

Profit Margin = Profit / Revenue

To calculate the profit, you can use this formula:

Profit = Revenue - Costs - Fees

Another tip to confirm if you put the values properly is that the profit margin is never more than 100%. However, the same thing isn't necessary for ROI.

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