Asked by Sareeka Ramlal on Apr 24, 2024
Verified
Largo Company recorded for the past year sales of $750,000 and average operating assets of $375,000.What is the margin that Largo Company needed to earn in order to achieve an ROI of 15%?
A) 2.00%
B) 15.00%
C) 9.99%
D) 7.50%
ROI
Return on Investment (ROI) measures the efficiency of an investment, calculated as net profit divided by the cost of the invested capital.
Margin
An accounting term that refers to the difference between the selling price of a product or service and its cost, often expressed as a percentage of the selling price.
Sales
The total revenue generated from goods or services sold by a company during a particular period.
- Acquire an understanding and perform calculations of the margin for investment possibilities.
- Evaluate the profit yield from investments in distinct business cases.
Verified Answer
NJ
nefertiti johnsonMay 02, 2024
Final Answer :
D
Explanation :
Turnover = Sales ÷ Average operating assets
= $750,000 ÷ $375,000 = 2
ROI = Margin × Turnover
15% = Margin × 2
Margin = 15% ÷ 2 = 7.5%
= $750,000 ÷ $375,000 = 2
ROI = Margin × Turnover
15% = Margin × 2
Margin = 15% ÷ 2 = 7.5%
Learning Objectives
- Acquire an understanding and perform calculations of the margin for investment possibilities.
- Evaluate the profit yield from investments in distinct business cases.