Question

Multiple Choice Question

If sales = $100,000, turnover = 2.0, and ROI = 10 percent, then
O net income = $5,000 and margin = 5%
O net income = $20,000 and margin = 5%
O net income = $5,000 and margin = 10%
O net income = $10,000 and margin is indeterminable

Answer 1

The formula for ROI (Return on Investment) is:

ROI = Net Income / Investment

We know that ROI is 10%, so we can write:

0.10 = Net Income / Investment

We also know that turnover is 2.0, which means that the investment is equal to:

Investment = Sales / Turnover

Substituting the given values, we get:

Investment = $100,000 / 2.0 = $50,000

Now we can solve for net income:

0.10 = Net Income / $50,000

Net Income = 0.10 x $50,000 = $5,000

The formula for margin is:

Margin = Net Income / Sales

Substituting the given values, we get:

Margin = $5,000 / $100,000 = 0.05 = 5%

Therefore, the answer is:

Net income = $5,000 and margin = 5%.