CommercialServices.com Corporation provides business-to-business services on the
ID: 2478008 • Letter: C
Question
CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below:
The Chief Financial Officer of the company believes a more realistic scenario would be a $3,000,000 increase in sales, requiring a $870,000 increase in average operating assets, with a resulting $454,650 increase in net operating income. What would be the company’s ROI in this scenario? (Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e., 0.1234 should be considered as 12.34%.))
The Chief Financial Officer of the company believes a more realistic scenario would be a $3,000,000 increase in sales, requiring a $870,000 increase in average operating assets, with a resulting $454,650 increase in net operating income. What would be the company’s ROI in this scenario? (Do not round intermediate calculations. Round your percentage answers to 2 decimal places (i.e., 0.1234 should be considered as 12.34%.))
Sales Net operating Income Average operating assets $11,310,000 $ 904,800 3,900,000
Explanation / Answer
Answer: Margin=Net operating income/Sales
=(904800+454650)/(11310000+3000000)
=1359450/14310,000
=9.5%
Turnover=Sales/Average Operating assets
=(11310000+3000000)/(3900000+870000)
=(14310000/4770000)
=3
ROI=Margin*Turnover
=9.5%*3=28.5%