> You get 1% on a loaf of bread, that's reported as 1% margin. BUT you turn that loaf around every day for a year, that's 365% margin, annualized.

I don't think that is how margins work. Let's say you sell a unit of bread for $100, but you spent $99 the make the bread that's a 1% margin. If you sell a single bread per day for 365 days you earned $36500 and spent $36135 to make those bread. That is still a 1% margin.

I think they are confusing compound interest with margin.

You spend the same $100 every day - you got that back when you sold the bread. On that cash balance, you make $1 every day of the year.

That's what annualizing does. It's on the dollars invested, not the money thrashed.

Hmmm. Interesting idea. So this is how I should be thinking about the process: On day one I invest $99 dollar into stuff and get a bread. I sell it on the same day for $100. (Turns out spherical cows in vacuum eat very expensive bread.) Then on the second day I take the $100 thus earned and spend $99 out of it on stuff to bake a bread. I have a bread and $1 dollar in the business. I sell the bread for $100 and I have $101 at the end of the day. And so on and so on. 365 days later at the end of the day I have $464. (I might be off by one there.)

If I look at that business in a year had $464 revenue and $99 cost. Investopedia defines gross margin as "(Revenue − Cost of goods sold) / Revenue" So that would be (464-99)/464=0.79. So that is a 79% margin. Below the 365%. Where I'm going wrong?

Mixing annualized numbers with transaction ones. Margin is a single sale. That's 1%

Look, I'm just making the point that comparing margins on a sale is a crappy way to compare business. It ignores the value you get for each investment dollar. Correct that by annualizing return per dollar. Then you see the relative value of business models e.g. McD's vs grocer store vs shoe store.