When trying to determine how much profit you stand to make on the sale of a listing, there are two main methods for calculating profit: Profit Margin and Return on Investment (or ROI).
Profit margin is calculated as:
(Revenue - Expenses) / Revenue
Expenses include your item's purchase costs and any fees (including FBA fees) assessed by the marketplace the item is sold on.
If you bought an item for $20, sold it for $100, and Amazon took a cut of 15% ($15), you would have a profit margin of 65%:
(Revenue ($100) - Expenses ($20+$15)) / Revenue ($100) = 65%
ROI is calculated as:
(Revenue - Expenses) / Expenses
Using the same example above of a $20 item sold for $100 with a 15% category fee, you would have an ROI of 186%
(Revenue ($100) - Expenses ($20+$15)) / Expenses ($35) = 186%
Comparing the two
One of the major differences between profit margin and ROI is that profit margin can never exceed 100%, while ROI can. There are pluses and minuses to each way of calculating profit, but one is not inherently better than the other. One of the main factors leading Appeagle to display profit margin instead of ROI is to be consistent with the way Amazon displays per item profitability to sellers within Seller Central and in their profitability calculator.