Question

Largo company recorded for the past year sales of $972,000 and average operating assets of $270,000. what is the margin that largo company needed to earn in order to achieve an roi of 53.8%? (hint: first solve for net operating income using roi and avg. operating assets. then, use sales and net operating income to determine margin.)

a.14.94%
b. 9.57%
c. 11.45%
d. 53.80%

Answer 1

To find the margin that Largo Company needed to earn in order to achieve an ROI of 53.8%, first calculate the net operating income and then use it to determine the margin. The margin is 14.94%. Therefore, the correct option is A.

Step-by-step explanation:

To find the margin that Largo Company needed to earn in order to achieve an ROI of 53.8%, we first need to calculate the net operating income. We can use the formula:

Net Operating Income = ROI * Average Operating Assets

Plugging in the values, we get:

Net Operating Income = 0.538 * $270,000 = $145,260

Next, we can calculate the margin using the formula:

Margin = Net Operating Income / Sales

Plugging in the values, we get:

Margin = $145,260 / $972,000 = 0.1494 = 14.94%

Therefore, the margin that Largo Company needed to earn in order to achieve an ROI of 53.8% is 14.94%.