Required information Exercise 11-13 Effects of Changes in Sales, Expenses, and A

Question

Required information Exercise 11-13 Effects of Changes in Sales, Expenses, and Assets on ROI [LO11-1) The following information applies to the questions displayed below) CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the recent year appear below: Sales Net operating income 144,eee Average operating assets 80e,eee $2,400,eee Exercise 11-13 Part 2 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 360%, with no increase in average operating assets. What would be the company's ROI? (Do not round intermedi te calculations. Round your answer to 2 decimal places.) Return on investment (ROI)

Explanation / Answer

Sales = 2400000*1.6 = 3840000

Net operating income = 144000*4.6 = 662400

Average operating assets = 800000

Net profit margin = Net operating income /sales = (662400/3840000) *100 = 17.25%

Total assets turnover = Sales/Total assets = 3840000/800000 = 4.8 times

Return on investment (ROI) = Net profit margin * Total assets turnover

= 17.25% * 4.8 times = 82.80%

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