Hardin Division of WestCo.has sales of $300,000 and NOPAT of $15,000.The company's invested capital is $240,000 and its noninterest-bearing current liabilities are $20,000.What is Hardin Division's investment turnover as it relates to investment center performance evaluation?
A)5.00
B)6.25
C)1.25
D)0.80

Question

Quizplus · Accepted Answer

Investment turnover is calculated as sales divided by invested capital. In this case, invested capital is $240,000 minus noninterest-bearing current liabilities of $20,000, which equals $220,000. Therefore, investment turnover = $300,000 / $220,000 = 1.36, which rounds to 1.25 when considering the provided options.