Question

Assume a company reported the following results:

Sales $300, 000
Net operating income?
Average operating assets $187, 500
Margin ?
Turnover ?
Return on investment (ROI) 70%
The margin is closest to:
A70%, B 40%, C 63%, D 23%

Answer 1

Explanation:

To find the missing values, we can use the ROI formula:

ROI = Margin x Turnover

We are given that ROI is 70%. We can use this to solve for the missing values:

Margin x Turnover = 70%

We can rearrange this equation to solve for Margin:

Margin = ROI / Turnover

To find Turnover, we can use the formula:

Turnover = Sales / Average Operating Assets

Plugging in the given values, we get:

Turnover = $300,000 / $187,500 = 1.6

Now we can solve for Margin:

Margin = 70% / 1.6 = 43.75%

Therefore, the closest option is B) 40%.