Question

Given a margin of 12%, sales of $150,000 and average operating assets of $90,000, the ROI is [blank] %. (Enter your answer as a whole number.)

Answer 1

To calculate the Return on Investment (ROI), we first need to determine the net profit from the sales based on the margin, and then use that to calculate the ROI.

**Step 1: Calculate the Net Profit**

Margin refers to the percentage of sales that is profit. Given a margin of 12%, we can find the net profit as follows:

\[
\text{Net Profit} = \text{Sales} \times \text{Margin}
\]
\[
\text{Net Profit} = 150,000 \times 0.12 = 18,000
\]

**Step 2: Calculate the ROI**

ROI is calculated using the following formula:

\[
\text{ROI} = \left( \frac{\text{Net Profit}}{\text{Average Operating Assets}} \right) \times 100
\]

Now we substitute the net profit and average operating assets into the formula:

\[
\text{ROI} = \left( \frac{18,000}{90,000} \right) \times 100
\]
\[
\text{ROI} = 0.2 \times 100 = 20\%
\]

Thus, the ROI is **20%**.