A company has operating income of $300,000, revenues of $1,500,000, total assets of $2,000,000 and an ROI of 15%. To improve the ROI, to increase ROI to 20%, which of the following investment turnovers would need to be achieved?
A) .75
B) 1.5
C) 1
D) 2

Question

Quizplus · Accepted Answer

The Dupont model can be used to analyze this scenario. The current situation is $300,000/$1,500,000 x $1,500,000/$2,000,000 = .15 = 15%. The income over revenue is .2 and the investment turnover is .75. .2 x .75 = .15 = ROI 15%. Therefore, too boost the ROI to 20%, the investment turnover would need to be 1.

A Company Has Operating Income of $300,000, Revenues of $1,500,000