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

ROI will be 22.94 %

Step-by-step explanation:

We have given that sales = $18150000

Average operating asset = $4900000

Net income = $1125300

We know that turnover is given as

Turnover
`=(sales)/(average\ operating\ asset)=(18150000)/(4900000)=3.70times`

Now profit margin is given as

Profit Margin
`=(net\ operating\ income)/(sales)* 100=(1125300)/(18150000)* 100=6.2` %

Now we know that ROI is given as

ROI = turnover × profit margin

ROI = 3.70 × 6.2%

ROI = 22.94%