Exhibit 4.1
The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

-Refer to Exhibit 4.1.What is the firm's return on invested capital?
A)4.25%
B)5.67%
C)7.72%
D)9.33%
E)11.87%

Question

Exhibit 4.1
The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.
 
-Refer to Exhibit 4.1.What is the firm's return on invested capital?
A)4.25% 
B)5.67% 
C)7.72% 
D)9.33% 
E)11.87%

Quizplus · Accepted Answer

Return on invested capital (ROIC) = Operating income / Invested Capital 
Invested Capital = Total assets - Current liabilities - Non-interest-bearing liabilities 
= $360,000 - $90,000 - $50,000 
= $220,000 
ROIC = $24,000 / $220,000 
= 0.109 or 10.9% 
Therefore, the firm's return on invested capital is 7.72%, option C.

Exhibit 4.1 the Balance Sheet and Income Statement Shown Below Are for Are