HOW IS ROI CALCULATED IN FMCG

Question

Accepted Answer

ROI in FMCG is calculated by dividing the net profit by the cost of investment.

ROI = (Net Profit / Cost of Investment) x 100
Net profit is the revenue generated minus the cost of goods sold and other expenses
Cost of investment includes all expenses related to marketing, advertising, and distribution
ROI helps in evaluating the effectiveness of marketing campaigns and making informed decisions
Example: If a company spends $100,000 on marketing and generates a net profit of $150,000, the ROI would be 50%

Accepted Answer

Potential ROI is simple , what Distributor is getting monthly as a %age of profit ,

Suppose Company ABC gives 1.5% margin to the distributor, and distributor is able to extend credit of 15 days and gets payment. So in a month 2 cycles .

Now yearly cycle is 24 , and he is getting 1.5% margin on sales.

So if you just calculate potential ROI which is simply around 36% .

This a trick to lure industry .

When calculating Actual ROI.

You need to find out

(ROI = returns / net investment)
Returns = (Total earnings - total Expenses)
Earning = net margins that dealer enjoy like eg. In ciggerate 1.5% , 1.5% atta , 2.75% Personal care and home care products excluding 4% or 3% supply charges upfront on primary depending**.
Expenses = direct exp and indirect exp
Investment = avg stock + avg credit extended +avg claims outstanding.

Now put everything in formula ,

Remember to cross check indirect expenses and market credit liabilities and other expenses which dealer is showing.

HOW IS ROI CALCULATED IN FMCG

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