Waldron Inc. is considering selling to a group of new customers that will bring in credit sales of $24,000 with a return on sales of 5%. The only new investment will be in accounts receivable. Waldron has a turnover ratio of 6 to 1 between sales and accounts receivable. What is their expected return on investment?
A)30%
B)25%
C)5%
D)None of the options

Question

Quizplus · Accepted Answer

The expected return on investment (ROI) is calculated by dividing the return on sales by the turnover ratio. Here, ROI = 5% / (1/6) = 30%.