Question

Required information
Exercise 11-13 Effects of Changes in Sales, Expenses, and Assets on ROI [LO11-1]

[The following information applies to the questions displayed below.]

CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below:

Sales $ 5,460,000
Net operating income $ 273,000
Average operating assets $ 910,000

Exercise 11-13 Part 3

3. The Chief Financial Officer of the company believes a more realistic scenario would be a $1,800,000 increase in sales, requiring a $300,000 increase in average operating assets, with a resulting $362,250 increase in net operating income. What would be the company’s ROI in this scenario? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Last Year:

Sales = $5,460,000
Net Operating Income = $273,000
Average Operating Assets = $910,000

Expected Scenario:

Sales = $5,460,000 + $1,800,000
Sales = $7,260,000

Net Operating Income = $273,000 + $362,250
Net Operating Income = $635,250

Average Operating Assets = $910,000 + $300,000
Average Operating Assets = $1,210,000

Return on Investment = Net Operating Income / Average Operating Assets
Return on Investment = $635,250 / $1,210,000
Return on Investment = 52.50%