Question

Adams Company revenues are $500 on invested capital of $250. Expenses are currently 60% of sales. If Angelo Company can reduce its capital investment by 20% in Adams Company, return on investment will be _____.

Answer 1

100%

Explanation:

The formula to calculate the return on investment is:

ROI=(Net Profit/Total Investment)*100

Net profit=Revenues-expenses=500-(500*0.6)=500-300=200

Total investment=250-(250*0.2)=250-50=200

Now, you can replace the values:

ROI= (200/200)*100

ROI= 100%

According to this, the answer is that If Angelo Company can reduce its capital investment by 20% in Adams Company, return on investment will be 100%.