Question

For the past year, Allargando Company recorded sales of $500,000 and average operating assets of $250,000. What is the margin that Allargando Company needed to earn in order to achieve an ROI of 12%? Multiple Choice 6.00% 12.00% 2.00% 8.33%

Answer 1

Answer:

6.00%

Explanation:

The company's desired return amount is given by the ROI multiplied by the amount invested, in this case, the average operating assets:

$R=0.12*\ 250,000\\R=\ 30,000$

The margin required in order to achieve a return of $30,000 is given by:

$M= \frac{R}{sales} =\frac{\ 30,000}{\ 500,000} \\M= 0.06 = 6.00\%$

Allargando Company's margin must be 6% in order to achieve a ROI of 12%.