CommercialServices.com Corporation provides business-to-business services on the

Question

CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below:

The entrepreneur who founded the company is convinced that sales will increase next year by 130% 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 intermediate calculations. Round your percentage answers to 2 decimal places (i.e., 0.1234 should be considered as 12.34%.))

CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below:

The entrepreneur who founded the company is convinced that sales will increase next year by 130% 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 intermediate calculations. Round your percentage answers to 2 decimal places (i.e., 0.1234 should be considered as 12.34%.))

Sales Net operating Income Average operating assets $11,310,000 $ 904,800 3,900,000

Explanation / Answer

Solution:

Sales after increase - 130% * $ 11,310,000    14,703,000 Net operating income - 360 % * $ 904,800       3,257,280 1 Margin = Net operating income /Sales * 100 Margin = $ 3,257,280 / $ 14,703,000 22.15% 2 Turnover = sales    14,703,000 3 ROI = Net Operating income / Average operating assets Net operating income - 360 % * $ 904,800       3,257,280 Average operating assets 3,900,000 ROI = $ 3,257,280 / $ 3,900,000 84%

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