Cabal Products is a division of a major corporation. Last year the division had total sales of $10,040,000, net operating income of $582,320, and average operating assets of $4,000,000. The company's minimum required rate of return is 14%. The division's return on investment (ROI) is closest to:
A)4.1%
B)14.6%
C)36.6%
D)0.9%

Question

Quizplus · Accepted Answer

ROI=Net Operating Income / Average Operating Assets
ROI=582,320/4,000,000
ROI=0.14558 or 14.56%

Since ROI is greater than the minimum required rate of return of 14%, the division is generating a positive return for the company. The closest choice to the calculated ROI is B, 14.6%.

Cabal Products Is a Division of a Major Corporation