Fern Company has a target rate of return of 14%, an ROI of 38%, and capital turnover of 2.5. The sales margin for Fern Company would be closest to
A)6%.
B)15%.
C)95%.
D)35%.

Question

Quizplus · Accepted Answer

The formula for ROI is as follows:

ROI = Sales Margin * Capital Turnover

We are given ROI = 38% and Capital Turnover = 2.5.

Substituting these values into the formula, we get:

38% = Sales Margin * 2.5

Solving for Sales Margin:

Sales Margin = 38% / 2.5 = 15.2% (rounded to the nearest percent)

Therefore, the closest answer choice is B) 15%.

Fern Company Has a Target Rate of Return of 14