Dantone, Inc. provides the following information: $$\begin{array} { | l | r | }
\hline \text { Profit margin ratio } & 5 \% \
\hline \text { Asset turnover ratio } & 2 \text { times } \
\hline \text { Net sales } & \$ 450,000 \
\hline \text { Target rate of return } & 9 \% \
\hline
\end{array}$$ Calculate the return on investment.

Question

Dantone, Inc. provides the following information: $$\begin{array} { | l | r | } 
\hline \text { Profit margin ratio } & 5 \% \
\hline \text { Asset turnover ratio } & 2 \text { times } \
\hline \text { Net sales } & \$ 450,000 \
\hline \text { Target rate of return } & 9 \% \
\hline
\end{array}$$ Calculate the return on investment.

Quizplus · Accepted Answer

The return on investment (ROI) can be calculated using the formula: ROI = Profit Margin Ratio * Asset Turnover Ratio. Given a Profit Margin Ratio of 5% (or 0.05) and an Asset Turnover Ratio of 2 times, the calculation is: ROI = 0.05 * 2 = 0.10 or 10%.

Dantone, Inc Calculate the Return on Investment