Mako Division had the following information: Asset base in Mako Division $400,000
Net income in Mako Division $50,000
Weighted average cost of capital 12%
Target ROI 15%
Margin for Mako Division 20%
What is the turnover ratio for Mako Division?
A) 0.200
B) 0.625
C) 0.125
D) 8.000

Question

Quizplus · Accepted Answer

Turnover ratio is calculated by dividing the margin by the target ROI. 
Margin = Net income / Asset base = $50,000 / $400,000 = 0.125
Target ROI = 15%
Turnover ratio = Margin / Target ROI = 0.125 / 0.15 = 0.625

Mako Division Had the Following Information: Asset Base in Mako