I honestly couldn't tell you - industries, even regions or time periods, will have such a big influence that a standard answer cannot begin to be useful. One of my previous employers was in the utility business, which you'd normally assume would need a mid-to-high single digit return. Yet a sister company operated on the cost plus model, and the local legislature allowed a ~10% profit margin. For my own employer however, a bankruptcy even meant we had a 27% WACC - so any investment needed to return at least this much. Same industry, same geography and time period (and inflation / economic environment), 3 different answers.

Hi Anonymous,

as commented by others, there is no universal metric you can use on this as there are too many variables that could have an influence on a key metric (industry, cycle, geography, stage of company etc..).

The best thing you can do if you get this question in a case is to benchmark with competitors - this should give you an idea on the positioning of the client.

Best,

Francesco

Hi,

Don't worry about the actual numbers. The interviewer would share the benchmarks if you ask for them (and if he has them)

Best

Agree with Guennael,

there is absolutely no way of telling.

There are some very, very general guidelines, like

• inverse relationship between turnover velocity and return on sales
• relationship between investment (capex) intensity and EBITDA margins

But I bet you can find counter-examples for each of them...