Cabell Products is a division of a major corporation. Last year the division had total sales of $25,320,000, net operating income of $1,924,320, and average operating assets of $6,000,000. The company's minimum required rate of return is 10%.The division's return on investment (ROI) is closest to:
A) 135.5%
B) 6.1%
C) 32.1%
D) 2.4%

Question

Quizplus · Accepted Answer

ROI = Net operating income / Average operating assets
ROI = 1,924,320 / 6,000,000 = 0.3207 or 32.1%
Since the ROI is higher than the minimum required rate of return of 10%, the division is generating a positive return for the corporation.

Cabell Products Is a Division of a Major Corporation