A company had assets at the beginning of the year of $7,750,000 and at the end of the year of $6,750,000.During the year they reported sales of $2,750,000 net income of $275,000.What was their return on investment for the year?
A)10%
B)4.0%
C)3.8%
D)3.3%

Question

Quizplus · Accepted Answer

Return on investment (ROI) is calculated by dividing net income by average total assets. Average total assets can be calculated by adding beginning assets and ending assets, then dividing by 2.

Average total assets = ($7,750,000 + $6,750,000) / 2 = $7,250,000

ROI = $275,000 / $7,250,000 = 0.038 or 3.8%

Therefore, the best choice is C.

A Company Had Assets at the Beginning of the Year