Question: Return on Investment: Margin vs Volume Example 1: 12% = 6% x 2 Example 2: 12% = 5% x 2.4 Example 3: 12% = 1%

Return on Investment: Margin vs Volume

  • Example 1: 12% = 6% x 2
  • Example 2: 12% = 5% x 2.4
  • Example 3: 12% = 1% x 12
  • Example 4: 12% = 12% x 1

Why is it important for you to know whether your firm looks like Examples 1 and 2 or like Example 3 or Example 4? What are the riskier examples? Why?

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