Question

For a recent year L’Oreal reported operating profit of €3,385 (in millions) for its Cosmetics division. Total assets were €12,888 (in millions) at the beginning of the year and €13,099 (in millions) at the end of the year. Compute return on investment for the year. (Enter answer in millions and Round your answers to nearest whole number)

Answer 1

The correct answer is 26.05%.

Step-by-step explanation:

According to the scenario, the given data are as follows:

Beginning Assets = 12,888 ( million)

Ending Assets = 13,099 (million)

Operating profit = 3,385 (million)

So, Average Assets for the year = (12,888 + 13,099) ÷ 2 = 12,993.5 (million)

So, we can calculate the return on investment by using following formula:

Return on investment = Operating profit ÷ Average assets for the year

By putting the value, we get

Return on investment = 3,385 ÷ 12,993.5 (million)

= 0.2605 or 26.05%