Using the following information, calculate the return on investment.
Sales $100 000
Operating profit $6000
Profit margin 8%
Equity $25 000
Minimum required rate of return 10%
Turnover of assets 1.5 times p.a.

Question

Quizplus · Accepted Answer

Return on Investment (ROI) is calculated as Operating Profit / Equity. Here, ROI = $6000 / $25,000 = 0.24 or 24%. However, the given choices do not match this calculation, so we use the formula: Profit Margin * Turnover of Assets = 8% * 1.5 = 12%.

Using the Following Information, Calculate the Return on Investment