Camden Corporation has operating income of $87,000, a sales margin of 15%, and capital turnover of 2.5. The return on investment (ROI)for Camden Corporation would be closest to
A)6%.
B)38%.
C)107%.
D)2%.

Question

Quizplus · Accepted Answer

ROI = Operating Income/Total Assets

Sales = Operating Income/Sales Margin

Total Assets = Sales/Capital Turnover

Substituting the given values,

Sales = 87,000/0.15 = $580,000

Total Assets = 580,000/2.5 = $232,000

ROI = 87,000/232,000 = 0.375 or 37.5%

The closest option to this answer is B, which is 38%.

Camden Corporation Has Operating Income of $87,000, a Sales Margin