CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below:
Sales | $ | 2,280,000 |
Net operating income | $ | 250,800 |
Average operating assets | $ | 760,000 |
The following questions are to be considered independently.
Garrison 16e Rechecks 2019-01-10
Required:
1. Compute the company's return on investment (ROI).
2. The entrepreneur who founded the company is convinced that sales will increase next year by 60% and that net operating income will increase by 100%, with no increase in average operating assets. What would be the company’s ROI?
3. The Chief Financial Officer of the company believes a more realistic scenario would be a $1,050,000 increase in sales, requiring a $572,000 increase in average operating assets, with a resulting $165,450 increase in net operating income. What would be the company’s ROI in this scenario?
1. ROI = net operating income / average operating assets
= 250800/760000 = 33%
2. ROI = (250800*2)/760000 = 66%
3. ROI = (250800+165450)/(760000+572000)
= 31.25%
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