The following data pertain to British Isles Aggregates Company, a producer of sa

Question

The following data pertain to British Isles Aggregates Company, a producer of sand, gravel, and cement, for the year just ended.

£ denotes the British pound sterling, the national monetary unit of Great Britain.

If the sales and average invested capital remain the same during the next year, to what level would total expenses have to be reduced in order to improve the firm’s ROI to 10 percent?

Sales revenue £ 6,450,000 Cost of goods sold 3,003,000 Operating expenses 3,253,500 Average invested capital 3,225,000

Explanation / Answer

Required net operating income=3225000*10% = $322500 Total expenses must be reduced to = 6450000-322500= $6127500

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