If operating income for a division is $6,000, invested assets are $25,000, and sales are $30,000, the investment turnover would be 5.0.

Question

Quizplus · Accepted Answer

Investment turnover is calculated by dividing the sales by the average invested assets (beginning and ending) during the period. Therefore, the investment turnover would be:

Investment Turnover = Sales / Average Invested Assets
Average Invested Assets = ($25,000 + $25,000) / 2 = $25,000
Investment Turnover = $30,000 / $25,000
Investment Turnover = 1.2

Therefore, the statement given in the question is false.

If Operating Income for a Division Is $6,000, Invested Assets