Question

BR Company has a contribution margin of 8%. Sales are $497,000, net operating income is $39,760, and average operating assets are $135,000. What is the company's return on investment (ROI)?

Answer 1

Answer:

The company's return on investment (ROI) is 29.45%.

Explanation:

Return on investment (ROI) is a profitability ratio that gives investors the opportunity to know the level of efficiency of each amount of dollar invested in a project at producing a profit.

Return on investment (ROI) can be computed using the following formula:

ROI = Net operating income / Average operating assets ............ (1)

Since;

Net operating income = $39,760

Average operating assets = $135,000

We therefore substitute the values into equation (1) and have:

ROI = $39,760 / $135,000 = 0.2945, or 29.45%

Therefore, the company's return on investment (ROI) is 29.45%.