Huang Company reported the following information for the current year: $\begin{array}{lrr}
\text { Sales } &\$400,000\
\text {Average Operating Assets } &\$250,000\
\text { Margin } &10\%\
\end{array}$
The company's return on investment was:
A) 10%.
B) 6.25%.
C) 16%.
D) Cannot be ascertained from the information provided.

Question

Huang Company reported the following information for the current year: $\begin{array}{lrr}
  \text { Sales } &\$400,000\
 \text {Average Operating Assets  } &\$250,000\
 \text { Margin } &10\%\
\end{array}$
 The company's return on investment was:
A) 10%.
B) 6.25%.
C) 16%.
D) Cannot be ascertained from the information provided.

Quizplus · Accepted Answer

Return on investment is calculated as net income divided by average operating assets.

Net income = $180,000 
Average operating assets = ($800,000 beginning assets + $1,200,000 ending assets)/2 = $1,000,000

ROI = $180,000 / $1,000,000 = 0.18 or 18%