If both the investment turnover and the return on sales ratio increased by 13 percent, the ROI would increase by: (Hint: Assume that each component of the ROI computation is 1.00 prior to the increase.)
A) 0.00 percent
B) 27.69 percent
C) 26.38 percent
D) 26.00 percent

Question

Quizplus · Accepted Answer

ROI = (Investment turnover x Return-on-sales)
Increased components of ROI = [(1.00 + 0.13) x (1.00 + 0.13)] = 1.13 x 1.13 = 1.2769
1.2769 - 1.00 = 0.2769 = 27.69% increase

If Both the Investment Turnover and the Return on Sales