Question

The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%. What is Clydesdale Company's rate of return on investment?

Answer 1

Answer:

45%

Explanation:

Given that,

Sales = $4,500,000

Invested assets = $2,000,000

Operating expenses = $3,600,000

Minimum rate of return = 7%

Operating profit of the company:

= Sales - Operating expenses

= $4,500,000 - $3,600,000

= $900,000

Therefore, the rate of return on investment is as follows:

= Net operating income ÷ Invested assets

= $900,000 ÷  $2,000,000

= 45%