Question

A company has a profit margin @25% and assets turnover of 3 times. What is the company's return of investment?​

Answer 1

ANSWER :

• ❖ If a company has a profit margin @25% and assets turnover of 3 times; then the company's Return of Investment is 75%.

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SOLUTION :

❒ Given :-

• Profit Margin of the company is 25%

• Assets Turnover of the company is 3 times

❒ To Calculate :-

• Return on Investment of the company = ?

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❒ Calculation :-

Here,

• Profit Margin = 25%

• Assets Turnover = 3 times

We know that,

• $\dag \: \: \underline{ \boxed{ \sf{ \: Return \: \: on \: \: Investment = Profit \: \: Margin \times Assets \: \: Turnover \: }}}$

Using this formula, we get,

• ✪ Return on Investment = Profit Margin × Assets Turnover

➨ Return on Investment = 25% × 3

∴ Return on Investment = 75%

• Hence, the Return on Investment will be 75%.

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KNOW MORE :

The three interrelated formulas for calculating Return on Investment (ROI) :-

• $\bigstar \: \: \rm{Return \: \: on \: \: Investment \: = \dfrac{ Net \: Operating \: \: Income}{Average \: \: Operating \: \: Assets}}$

• $\bigstar \: \: \rm{Return \: \: on \: \: Investment \: = \dfrac{ Net \: Operating \: \: Income}{Sales} \times \dfrac{Sales}{Average \: \: Operating \: \: Assets}}$

• $\bigstar \: \: \rm{Return \: \: on \: \: Investment \: = Profit \: \: Margin \times Turnover}$