Question

Redmond awnings, a division of wrap-up corp. , has a net operating income of $60,000 and average operating assets of $300,000. The required rate of return for the company is 15%. What is the division’s roi?.

Answer 1

Return on Investment (ROI) =

net operating income divided by average operating assets times 100.

ROI = ($60,000/$300,000) × 100

 = 0,2 x 100

 = 20%

Thus it is safe to say that the division has made a good investment as the ROI is greater than the required rate of return of 15%.