Question

Returns on investment is computed in the following manner. ROI is equal to turnover multiplied by earning as a percent of sales. turnover is sales divided by total investment.. total investment is current assets (inventories, accounts receivables and cash) plus fixed assets. earnings equal sales minus the cost of sales

a) construct an influence diagram that relates these variables
b) define symbols and develop mathematical model

Answer 1

+-----------+

| Sales |

+-----+-----+

|

v

+-----+-----+

|Cost of Sales|

+-----+-----+

|

v

+-----+-----+

| Earnings |

+-----+-----+

|

v

+-----+-----+ +-------------+

| Total Investment = | Current Assets | + | Fixed Assets |

+-----+-----+ +-------------+

|

v

+-----+-----+

| Turnover |

+-----+-----+

|

v

+-----------+

| ROI |

+-----------+

Step-by-step explanation:

b) Symbols:

Sales: S

Cost of sales: C

Earnings: E

Current assets: A

Fixed assets: F

Total investment: I

Turnover: T

Return on investment: R

Mathematical model:

E = S - C

I = A + F

T = S / I

R = T * (E / S)