InvestorQ : Should I also look at trading profits the way I look at business profits?
Arti Chavan made post

Should I also look at trading profits the way I look at business profits?

Answer
image
Khushi Patel answered.
3 years ago
Follow

How do we look at returns on business? There are various measures of return on business. We look at it in terms of the total profit made in the business in absolute terms. We also look at returns in terms of what the business is generating in terms of the level of activity or sales generated. The business also needs to be looked at in terms of what returns it generates for the suppliers of capital; both debt and equity. That is what entails a comprehensive look at returns in business. Trading is somewhat similar. Firstly, you need to make returns that justify your costs in absolute terms. Secondly, your return on capital should be more than what you get in a very passive approach. Otherwise, why take the trouble at all? Thirdly, trading needs to generate solid returns on the capital committed to trading. Lastly, trading also needs to justify the level of activity. If you are generating more brokerage than returns then you are surely not in business.

0 Views