Question

The following information is available for Sweet Dreams Company: Sales $ 175,000 Operating expenses $ 161,000 Operating assets $ 50,000 Stockholder’s equity $ 43,750 Cost of capital 11 % What is Sweet Dreams Company's return on investment (ROI)?

Answer 1

Sweet Dreams Company's return on investment (ROI) is 28%

Step-by-step explanation:

Return on Investment = Net Income / Investment

When Net Income= Sales-Operating expenses

NI = $175,000 - $161,000

=$14,000

When Operating Assets = $40,000 as it is also known as Operating Asset

Therefore Return on Investment = Net Income / Investment

ROI=$14,000 / $50,000

ROI=0.28

ROI=28%