For the most recent year, Robin Company reports operating income of $660,000. Robin's sales margin is 7%, and capital turnover is 2.0. What is Robin's return on investment (ROI)?
A)4%
B)7%
C)2%
D)14%

Question

Quizplus · Accepted Answer

ROI = Operating Income / Total Assets

Total Assets = Operating Income / Sales Margin x Capital Turnover

Total Assets = $660,000 / 0.07 x 2.0 = $18,857,143

ROI = $660,000 / $18,857,143 = 0.035, or 3.5%

However, the question asks for ROI as a percentage, so we need to multiply by 100 to get the final answer:

ROI = 3.5% x 100 = 14%

Therefore, the correct answer is D (14%).

For the Most Recent Year, Robin Company Reports Operating Income