Sales and average operating assets for Wyeth Company and Genesis Company are given below:
$\begin{array}{lllr}
&&\text { Average }\
&&\text { Operating }\
&\text { Sales }&\text { Assets}\
\text { Wyeth Company } & \$ 20,000 & \$ 8,000 \
\text { Genesis Company } & \$ 50,000& \$ 10,000
\end{array}$

What is the margin that each company will have to earn in order to generate a return on investment of 20%?
A) 12% and 16%.
B) 50% and 100%.
C) 8% and 4%.
D) 2.5% and 5%.

Question

Sales and average operating assets for Wyeth Company and Genesis Company are given below:
$\begin{array}{lllr}
&&\text { Average }\
&&\text { Operating }\
&\text { Sales }&\text { Assets}\
\text { Wyeth Company } & \$ 20,000 & \$ 8,000 \
\text { Genesis Company } & \$ 50,000& \$ 10,000
\end{array}$

What is the margin that each company will have to earn in order to generate a return on investment of 20%?
A) 12% and 16%.
B) 50% and 100%.
C) 8% and 4%.
D) 2.5% and 5%.

Quizplus · Accepted Answer

The return on investment (ROI) is calculated as (Net Operating Income / Average Operating Assets). To achieve a 20% ROI, Wyeth needs a margin of 8% (1600/20000) and Genesis needs a margin of 4% (2000/50000).

Sales and Average Operating Assets for Wyeth Company and Genesis