Comfortable Carpets manufactures and installs various types of carpets for its c
ID: 2371527 • Letter: C
Question
Comfortable Carpets manufactures and installs various types of carpets for its customers. Comfortable Carpets had sales of $1,200,000 for the year. The company also has net operating income of $300,000, and average operating assets of $1,500,000.
Required:
A. What is Comfortable Carpets' margin and turnover for the year? Do not round your intermediate calculations. Do not include a percent sign as part of your answer. Round margin to the nearest whole percent and turnover to one decimal place.
B. What is the ROI for the company?
Explanation / Answer
(A) Using the formula for profit margin, Margin=Net income/sales revenue X 100 . margin=300,000/1,200,000 X 100 margin = 25 percent. Asset turnover=revenue/total assets. Asset turnover=1,200,000/1,500,000 Asset turnover=0.8 (B) Return on investment (ROI)= ((earning-Initial investment)/Initial investment) X 100. ROI=((300,000-1,500,000)/1,500,000) X 100= -80 percent