ROI or Net profit - Which is Important?

[knarendra]

I read in an article, The reporter asked about " Why your co. profit is near 2%?
The company CEO said, "Dont see the net profit only. Our ROI is near 30%"

Im really confusion about it. Anybody explain it?

Magazine: Nanayam Vikadan- Tamil
Company: Camlin group

 

[Mr.G]

Net is always more important but the main problem is that most of the time, rio is wasted and bottom line is lower The CEO is obviously trying that his performance is better than others but it is not like that. I suggested you don't fall for all of this.

 

[cinderblock]

When you are making premium / innovative products, an upfront investment needs to be made. Since the denominator in ROI is high, the ROI remains low. But you can charge a premium for your products and your net profit margin (Net / Sales) can be high.

When you are trading goods (buying from one marking it up and selling it the other), there is no investment involved. So, ROI is high. But you are not adding any value to the product. Your sales are high but since there is no value addition, you cannot charge a premium and the profit margin is lower.