Parkinson Company provides the following financial information: Calculate return on investment based on the information given above.
A)6.3%
B)5.3%
C)6.9%
D)7.2%

Question

Parkinson Company provides the following financial information:  Calculate return on investment based on the information given above.
A)6.3% 
B)5.3% 
C)6.9% 
D)7.2%

Quizplus · Accepted Answer

Return on investment can be calculated as operating income divided by average operating assets. Using the information given in the table, we can calculate the average operating assets as (Beginning Operating Assets + Ending Operating Assets) / 2 = ($426,000 + $438,000) / 2 = $432,000. Operating income is given as $28,080. Therefore, return on investment is calculated as $28,080 / $432,000 = 6.5%. The closest answer choice is C with 6.9%.

Parkinson Company Provides the Following Financial Information: Calculate Return