The Dry Wall Division reports the following operating data for the past two years:
$\begin{array}{lrr}
&\text { Year } 1& \text { Year } 2\
\text { Margin } & 16 \% & ? \
\text { Turnover } & 2.5 & 2.0 \
\text { Average operating assets } & ? & \$ 150,000 \
\text { Net operating income } & \$ 40,000 & ? \
\text { Stockholders' equity } & \$ 80,000 & \$ 125,000\
\text { Sales }&?&?
\end{array}$

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The return on investment at the Dry Wall Division was exactly the same in Year 1 and Year 2.
The margin in Year 2 was:
A) 48%.
B) 32%.
C) 20%.
D) 10%.

Question

The Dry Wall Division reports the following operating data for the past two years:
$\begin{array}{lrr}
&\text { Year } 1& \text { Year } 2\
\text { Margin } & 16 \% & ? \
\text { Turnover } & 2.5 & 2.0 \
\text { Average operating assets } & ? & \$ 150,000 \
\text { Net operating income } & \$ 40,000 & ? \
\text { Stockholders' equity } & \$ 80,000 & \$ 125,000\
\text { Sales }&?&?
\end{array}$

-
The return on investment at the Dry Wall Division was exactly the same in Year 1 and Year 2.
The margin in Year 2 was:
A) 48%.
B) 32%.
C) 20%.
D) 10%.

Quizplus · Accepted Answer

The return on investment (ROI) is calculated as Margin x Turnover. Since ROI is the same for both years, we have 16% x 2.5 = Margin in Year 2 x 2.0. Solving for Margin in Year 2 gives us 20%.

The Dry Wall Division Reports the Following Operating Data for the Past