Question

Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The company's Springfield Club reported the following results for the past year:
Sales $780,000
Net operating income $17,940
Average operating assets $100,000


The following questions are to be considered independently.

Required:
Compute the Springfield club's return on investment (ROI).

Answer 1

Answer:Springfield club's return on investment (ROI) is 17.94%

Explanation:

Return on investment (ROI) is given as the ratio of the net operating income to average operating assets and  expressed in percentage .

ROI = Net operating income / Average operating assets

Given that

Net operating income =$17,940

Average operating assets = $100,000

ROI = $17,940/ $100,000 = 0.1794, 17.94%

Therefore, the the Springfield club's return on investment (ROI) is 17.94%