Madrid Company has a return on investment of 12.5%, sales of $4,000,000, and a profit margin of 5%. How much were Madrid's total assets?

Question

Quizplus · Accepted Answer

Return on Investment (ROI) is calculated as (Net Profit / Total Assets). Given ROI is 12.5% and profit margin is 5%, the net profit is 5% of $4,000,000, which is $200,000. Using the formula $200,000 / Total Assets = 12.5%, Total Assets = $200,000 / 0.125 = $1,600,000.

Madrid Company Has a Return on Investment of 12