Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 18

Matthews Produce harvests and sells Florida oranges. Matthews has hired you to determine its return on investment (ROI) based on both net book value and on gross book value. You are given that profits are $2 million, the net book value (NBV) of operating assets is $10 million, and the gross book value (GBV) of these assets is $40 million. What is ROI based on NBV and based on GBV?

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Return on investment:

Return on investment states that it is the ratio lies among net profit and investment costs, The higher the return on investment, the better it is. The Return on investment is expressed in the form of percentage.

Return on investment can be computed by using the following formula:-