Waldron Inc. is considering selling to a group of new customers that will bring in credit sales of $24,000 with a return on sales of 5%. The only new investment will be in accounts receivable. Waldron has a turnover ratio of 6 to 1 between sales and accounts receivable. What is Waldron Inc.'s expected return on investment?
A) 30%
B) 25%
C) 5%
D) 0.8%

Question

Quizplus · Accepted Answer

Expected Accts Receivable = Credit Sales/Turnover = 24,000/6 = 4,000
Incremental ROI = (24,000 × 5%)/4,000 = 30%