Asked by Brittney Hayes on Jul 25, 2024

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The margin in Year 2 was?

A) 12.00%.
B) 22.50%.
C) 27.00%.
D) 18.75%.

Return on Investment

A profitability metric that measures the gain or loss generated on an investment relative to the amount of money invested.

Operating Assets

Assets required for a company to conduct its daily business operations, including both current and long-term assets.

Margin

The difference between the sales price of a good or service and its cost, expressed as a percentage of the sales price.

  • Understand the concept of Return on Investment (ROI) and how it is calculated.
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DJ
Dhaval jagtapJul 25, 2024
Final Answer :
A
Explanation :
The margin in Year 2 can be calculated using the formula for Return on Investment (ROI), which is ROI = Margin * Turnover. Given that the turnover is the same for both years and knowing the ROI for Year 2 (18%), we can find the margin for Year 2 by understanding how margin and turnover relate to ROI in Year 1. In Year 1, ROI is 22.5%, and the margin is 15%. Since turnover is the same for both years, and ROI for Year 2 is 18%, the margin must adjust to achieve this ROI with the same turnover rate. To find the exact margin for Year 2, we use the given data: ROI for Year 1 is 22.5% with a margin of 15%, implying a turnover rate that when applied to Year 2 with an 18% ROI should give us the margin. Without direct numbers for turnover, we use the relationship that if ROI decreases (from 22.5% to 18%) with constant turnover, the margin must decrease proportionally. The only option that represents a decrease in margin proportionate to the decrease in ROI, given the same turnover, is 12%, making A the correct choice. This is a conceptual explanation based on the information provided; exact calculations would require more data on turnover or sales and operating assets for both years.