Blanco Corporation's Cajun Spice division has a segment margin is $432,500 for the current reporting period.The division has an asset turnover of 1.6.Segment margin as a percentage of sales is 10%.What is the division's ROI?
A)16%
B)10%
C)6%
D)The answer cannot be determined from the information given.

Question

Quizplus · Accepted Answer

ROI is calculated as the segment margin divided by the assets. Given the asset turnover is 1.6 and the segment margin as a percentage of sales is 10%, we can find the sales and then the assets. Sales = $432,500 / 0.1 = $4,325,000. Assets = Sales / Asset Turnover = $4,325,000 / 1.6 = $2,703,125. ROI = Segment Margin / Assets = $432,500 / $2,703,125 = 16%.

Blanco Corporation's Cajun Spice Division Has a Segment Margin Is