Baad Industries is a division of a major corporation. Last year the division had total sales of $20,440,000, net operating income of $1,860,040, and average operating assets of $7,000,000.
-The division's return on investment (ROI) is closest to:
A)21.0%
B)26.6%
C)6.8%
D)2.5%

Question

Quizplus · Accepted Answer

ROI = (Net income / Investment) x 100%

Net income = Total revenues – Total expenses = $1,455,000 - $840,000 = $615,000

Investment = Beginning assets + Capital expenditures - Depreciation = $2,000,000 + $100,000 - $360,000 = $1,740,000

ROI = ($615,000 / $1,740,000) x 100% = 35.3%

Therefore, the closest option is B) 26.6%, as it is the only one that is in the range of the calculated ROI.

Baad Industries Is a Division of a Major Corporation