Question

Assume the Electronics Division of ABC Electronics had the following data from last year: Net sales $100,000 Operating income $30,000 Average total assets 150,000 Management’s target rate of return 15% What is the division’s return on investment?

Answer 1

20%

Step-by-step explanation:

The computation of the return on investment is shown below:

Return on investment = Operating income ÷ average total assets

where,

Operating income is $30,000

And, the average total assets is $150,000

So, the return on investment is

= $30,000 ÷ $150,000

= 20%

By dividing the operating income with the average total assets we can het the return on investment