[GeorJnsJr680]

Would the normal rate of return on investment be the same in all industries?

[morgaine300]

Certainly not. The "investments" are the assets, i.e. what the company invests in to run their business and make profits. The return they get is showing how well they are utilizing these assets.

However, some companies need minimal investments. For instance, if I chose to do accounting out of my home, I already have the home (and can even count part of it off my taxes), and can get by with a computer, printer, etc. and some filing cabinets, and my internet connection (all of which I already have but of course would use more), and mostly a lot of supplies. (And some of those are expenses, not investments.)

What if instead I decide to start doing auto repair in some extra space I have in my back yard. (Assuming I'm zoned for it, but never mind.) I would now need perhaps a new building and lots of tools and more importantly, diagnostic equipment and that sort of thing. (Plus I'd still need the computer and supplies.)

But how do I relate those two things? I really can't. If I invested 30 times as much to have an auto repair shop in my back yard, that means I'd have to have net income 30 times higher in order to stay at the same ROI. That really doesn't make much sense. My net income could be exactly the same between the two businesses. MY ROI should actually be way higher for the accounting business, but that doesn't mean it's actually doing any better. It just means I don't need to invest a lot to do it. (Meaning it's really just a whole lot less risky.)

Think about an airline! Lots of invested assets going on there!

You basically cannot compare ANY ratios in different types of industries because situations are different. Real comparisons can only be made among companies of the same industries or between two+ years of the same company.