Question

ABC Industries is a division of a major corporation. Data concerning the most recent year appears below: Sales $ 18,150,000 Net operating income $ 1,125,300 Average operating assets $ 4,900,000 The division's return on investment (ROI) is closest to:

Answer 1

Answer:

ROI will be 22.94 %

Explanation:

We have given that sales = $18150000

Average operating asset = $4900000

Net income = $1125300

We know that turnover is given as

Turnover $=\frac{sales}{average\ operating\ asset}=\frac{18150000}{4900000}=3.70times$

Now profit margin is given as

Profit Margin $=\frac{net\ operating\ income}{sales}\times 100=\frac{1125300}{18150000}\times 100=6.2$ %

Now we know that ROI is given as

ROI = turnover × profit margin

ROI = 3.70 × 6.2%

ROI = 22.94%