Sales and average operating assets for Company P and Company Q are given below: Company P sales...

Question:

Sales and average operating assets for Company P and Company Q are given below:

Company P sales were $21,560 and average operating assets were $15,400.

Company Q sales were $103,680 and average operating assets were $19,200.

What is the margin that each company will have to earn in order to generate a return on investment of 35%?

Return on Investment:

Return on Investment is given as the net income divided by the operating assets of the company. It is an important measure of how well the company is doing in utilizing its assets to bring in value as by implication the company's assets are the source of the value.

Answer and Explanation:

Required Return on Investment = 35%

Note that Return on Investment = Net Income / Average Operating Assets

For Company P,

Net Income should be =...

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Return on Investment: Definition, Formula & Example

from Intro to Business: Help and Review

Chapter 25 / Lesson 6
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