Step Up Ladders Company provides the following financial information: $$\begin{array} { | l | r | }
\hline \text { Income from operations } & \$ 250,000 \
\hline \text { Interest expense } & 49,000 \
\hline \text { Gains/(losses) on sale of equipment } & 2800 \
\hline \text { Net income } & 198,200 \
\hline \text { Total assets at Jan. 1 } & 2,700,000 \
\hline \text { Total assets at Dec .31 } & 3,500,000 \
\hline
\end{array}$$ Calculate return on investment based on the information given above.(Round your answer to two decimal places.)
A) 9.26%
B) 6.39%
C) 8.06%
D) 7.14%

Question

Step Up Ladders Company provides the following financial information: $$\begin{array} { | l | r | } 
\hline \text { Income from operations } & \$ 250,000 \
\hline \text { Interest expense } & 49,000 \
\hline \text { Gains/(losses) on sale of equipment } & 2800 \
\hline \text { Net income } & 198,200 \
\hline \text { Total assets at Jan. 1 } & 2,700,000 \
\hline \text { Total assets at Dec .31 } & 3,500,000 \
\hline
\end{array}$$ Calculate return on investment based on the information given above.(Round your answer to two decimal places.)
A) 9.26%
B) 6.39%
C) 8.06%
D) 7.14%

Quizplus · Accepted Answer

Return on investment (ROI) is calculated as Net Income divided by Average Total Assets. Net income is given as $198,200. Average total assets are calculated as the sum of the assets at the beginning and end of the period divided by 2, which is ($2,700,000 + $3,500,000) / 2 = $3,100,000. Therefore, ROI = ($198,200 / $3,100,000) * 100 = 6.39%. However, the correct calculation considering the provided options should be as follows: The error in the initial explanation was in the final calculation and choice selection. Correcting this, ROI = ($198,200 / $3,100,000) * 100 = 6.39%, which matches option B, not C. The initial selection was a mistake. The correct answer, based on the calculation provided, should indeed be B, reflecting a 6.39% return on investment.

Step Up Ladders Company Provides the Following Financial Information Calculate Return on Investment Based on the Information Given Above