Question

The following data pertain to Turk Company's operations last year: Sales $ 900,000 Net operating income...

The following data pertain to Turk Company's operations last year: Sales $ 900,000 Net operating income $ 36,000 Contribution margin $ 150,000 Average operating assets $ 180,000 Stockholders' equity $ 100,000 Plant, property, & equipment $ 120,000 Turk's return on investment for the year was:

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Answer #1

Return On Investment =

net operating income /share holders equity *100

= ($36000/$100,000)*100

= 36 percentage  

Explanation : generally ROI is the measurement ratio of efficiency of an organization. It is used to evaluate the performance of a business. It is calculated in a different ways .sometimes it is the ratio of net operating income to average assets. If you use the average assets for calculating ROI, it measures the efficiency of an assets to generate net income. If you use the share holder equity it evaluates the efficiency of share holders equity to generate the net operating income.

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