Question

Step Up Ladders Company provides the following financial​ information: Income from operations ​$400,000 Interest expense ​47,000 ​Gains/(losses) on sale of equipment ​3,000 Net income ​350,000 Total assets at Jan. 1 ​2,600,000 Total assets at Dec .31 ​3,400,000 Calculate return on investment based on the information given above.​ (Round your answer to two decimal​ places.)

Answer 1

Answer:

13.33%

Explanation:

Income from operations ​$400,000

Interest expense ​47,000

​Gains/(losses) on sale of equipment ​3,000

Net income ​350,000

Total assets at Jan. 1 ​2,600,000 Total assets at Dec .31 ​3,400,000

the formula used to calculate return on investment (ROI) is:

ROI = income from operations / average total assets

ROI = $400,000 / {($2,600,000 + $3,400,000) / 2} = $400,000 / $3,000,000 = 0.1333 or 13.33%

Return on investment measures the profitability of an investment during a period of time.