Holo Company reported the following financial numbers for one of its divisions for the year; average total assets of $5,800,000; sales of $5,375,000; cost of goods sold of $3,225,000; and operating expenses of $1,147,000. Compute the division's return on investment:
A) 17.3%.
B) 14.7%.
C) 21.3%.
D) 18.6%.
E) 10.4%.

Question

Quizplus · Accepted Answer

Return on Investment (ROI) can be calculated using the below formula:

ROI = (Net income / Average Total Assets) * 100

Here, Net income = Sales - Cost of Goods Sold - Operating Expenses
= $5,375,000 - $3,225,000 - $1,147,000
= $1,003,000

Average Total Assets = $5,800,000

Substituting the values in the ROI formula, we get:

ROI = ($1,003,000 / $5,800,000) * 100
= 17.3%

Therefore, the division's ROI is 17.3%. Option A is the correct answer.

Holo Company Reported the Following Financial Numbers for One of Its