Question

Assume the Residential Division of KappyKappy Faucets had the following results last year:

Net sales $6,360,000
Operating income 636,000
Average total assets 5,300,000
Management's target rate of return 16%
What is the division's return on investment?

Answer 1

12%

Step-by-step explanation:

Calculation for the division's return on investment

Using this formula

Return On Investment = Operating income /Average total assets

Let plug in the formula

Return on investment= $636,000/$5,300,000

Return on investment= 0.12*100

Return on investment=12%

Therefore the division's return on investment will be $12%