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 may be closest to
A)6%.
B)15%.
C)95%.
D)35%.

Question

Quizplus · Accepted Answer

B)
Capital Turnover = Sales/Total Assets
2.5 = Sales/Total Assets
2.5 Total Assets = Sales
ROI = Operating income/Total Assets
38% = Operating income/Total Assets
.38 Total Assets = Operating income
Sales margin = Operating income/Sales
Sales margin = .38 Total assets/2.5 Total assets
Sales margin = .15

Fern Company Has a Target Rate of Return of 14%,an