Sales and average operating assets for Company P and Company Q are given below:

$\begin{array}{lccc}
& \underline { \text { Sales Average } } & \text { Operating Assets } \
\text { Company P } & \$ 20,000 & \$ 8,000 \
\text { Company Q } & \$ 50,000 & \$ 10,000
\end{array}$

What is the margin that each company (Company P and Company Q,respectively)will have to earn in order to generate a return on investment of 20%?
A) 2.5% and 5%.
B) 8% and 4%.
C) 12% and 16%.
D) 50% and 100%.

Question

Sales and average operating assets for Company P and Company Q are given below:

$\begin{array}{lccc}
& \underline { \text { Sales Average } } & \text { Operating Assets } \
\text { Company P } & \$ 20,000 & \$ 8,000 \
\text { Company Q } & \$ 50,000 & \$ 10,000
\end{array}$

What is the margin that each company (Company P and Company Q,respectively)will have to earn in order to generate a return on investment of 20%?
A) 2.5% and 5%.
B) 8% and 4%.
C) 12% and 16%.
D) 50% and 100%.

Quizplus · Accepted Answer

To achieve a 20% return on investment, Company P needs a margin of 8% (\$1,600 profit on \$20,000 sales) and Company Q needs a margin of 4% (\$2,000 profit on \$50,000 sales).

Sales and Average Operating Assets for Company P and Company