Question

Compute the Return on Investment (ROI) [LO11-1]

Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below:
Sales $ 17,300,000
Net operating income $ 4,700,000
Average operating assets $ 36,000,000
Required:
1. Compute the margin for Alyeska Services Company. (Round your answer to 2 decimal places.)
2. Compute the turnover for Alyeska Services Company. (Round your answer to 2 decimal places.)
3. Compute the return on investment (ROI) for Alyeska Services Company. (Round your intermediate calculations and final answer to 2 decimal places.)

Answer 1

See below

Step-by-step explanation:

1. Margin

= Net operating income / Sales

= $4,700,000 / $17,300,000

= 0.2716 or 27.17%

2. Turnover

= Sales / Average operating assets

= $17,300,000 / $36,000,000

= 0.48

3. Return on investment

= Margin × Turnover

= 27.17% × 0.48

= 13%