Weston Company had sales revenue and operating expenses of $5,000,000 and $4,200,000, respectively, for the year just ended. If invested capital amounted to $6,000,000, the firm's ROI was:
A) 13.33%.
B) 83.33%.
C) 120.00%.
D) 750.00%.
E) None of the other answers are correct.

Question

Quizplus · Accepted Answer

ROI (Return on Investment) is a financial performance ratio that measures the profit or loss generated by the company's operations relative to the amount of investment made. It is expressed as a percentage and calculated as follows:

ROI = Net Income / Invested Capital

Where:

Net Income = Sales Revenue - Operating Expenses

Invested Capital = Total Assets - Current Liabilities

Using the information provided:

Net Income = $5,000,000 - $4,200,000 = $800,000

Invested Capital = $6,000,000

ROI = $800,000 / $6,000,000 = 0.1333 or 13.33%

Therefore, the correct answer is A) 13.33%.

Weston Company Had Sales Revenue and Operating Expenses of $5,000,000