The Reed Division reports the following operating data for the past two years: The return on investment at Reed was exactly the same in Year 1 and Year 2.
-Net operating income in Year 2 amounted to:
A)$60,000
B)$50,000
C)$40,000
D)$35,000

Question

The Reed Division reports the following operating data for the past two years: The return on investment at Reed was exactly the same in Year 1 and Year 2.
-Net operating income in Year 2 amounted to:
A)$60,000 
B)$50,000 
C)$40,000 
D)$35,000

Quizplus · Accepted Answer

ROI in Year 1: ROI = Margin F1F1F1S1F1F1F10 Turnover = 16% F1F1F1S1F1F1F10 2.5 = 40%
By assumption,the ROI is the same in Year 2 as in Year 1.Therefore,in Year 2:
Net operating income = ROI F1F1F1S1F1F1F10 Average operating assets = 40% F1F1F1S1F1F1F10 $150,000 = $60,000

The Reed Division Reports the Following Operating Data for the Past