Etowah Company reported the following information for 2012: $$\begin{array} { l r }
\text { Sales } & \$ 600,000 \
\text { Average Operating Assets } & \$ 300,000 \
\text { Margin } & 8 \%
\end{array}$$ The company's ROI for 2012 was
A) 8%.
B) 16%.
C) 50%.
D) 4%.

Question

Etowah Company reported the following information for 2012: $$\begin{array} { l r } 
\text { Sales } & \$ 600,000 \
\text { Average Operating Assets } & \$ 300,000 \
\text { Margin } & 8 \%
\end{array}$$ The company's ROI for 2012 was
A) 8%.
B) 16%.
C) 50%.
D) 4%.

Quizplus · Accepted Answer

The ROI (Return on Investment) is calculated by multiplying the margin by the turnover. The turnover is calculated as Sales divided by Average Operating Assets. Here, turnover is $600,000 / $300,000 = 2. The margin is 8%, so ROI = 8% * 2 = 16%.