Parkinson Company provides the following financial data:
Income from operations $200,000
Interest expense $45,000
Gains/(losses) on sale of equipment ($2,500)
Net income $152,500
Total assets at Jan 1 $2,600,000
Total assets at Dec 31 $3,200,000
How much is the return on investment?
Return on Investment:
Return on investment is a performance measure for evaluating how well a business utilizes assets; it serves as a return ratio and is used in business decision to evaluate company's profitability or compare different investment decisions.
The drawback of return on investment is that when used as a projection for future returns, the equation does not factor risk and higher projected returns may deceive investors.
Answer and Explanation:
Return on investment is calculated as:
- Return on investment = Net income / Average Assets
- Average Assets = (Assets at beginning + Assets at end)/2
See full answer below.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from Intro to Business: Help and ReviewChapter 25 / Lesson 6