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

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

 

Sales	$8,400,000
Net operating income	$800,000
Average operating assets	$3,200,000

   

Consider each of the following requirements independently.

 

Requirement 1:

Compute the company's return on investment (ROI). (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

 

Return on investment (ROI)

%

 

Requirement 2:

The entrepreneur who founded the company is convinced that sales will increase next year by 40% and that net operating income will increase by 160%, with no increase in average operating assets. What would be the company's ROI? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Return on investment (ROI)

%

 

Requirement 3:

The chief financial officer of the company believes a more realistic scenario would be a $1,900,000 increase in sales, requiring a $800,000 increase in average operating assets, with a resulting $330,000 increase in net operating income. What would be the company's ROI in this scenario? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

   

Return on investment (ROI)

%

rev: 05_03_2012, 05_16_2012

Explanation:

1:

Margin =	Net Operating income
	Sales
=	$800,000	= 9.524%
	$8,400,000

   

Turnover =	Sales
	Average operating assets
=	$8,400,000	= 2.625
	$3,200,000

 

ROI	= Margin × Turnover
	= 9.524% × 2.625 = 25%

 
2:

Margin =	Net Operating income
	Sales
=	$800,000(1.00+1.6)
	$8,400,000(1.00+0.4)
=	$2,080,000	= 17.687%
	$11,760,000

    

Turnover =	Sales
	Average operating assets
=	$8,400,000(1.00+0.4)
	$3,200,000
=	$11,760,000	= 3.675
	$3,200,000

 

ROI	= Margin × Turnover
	= 17.687% × 3.675 = 65%

 
3:

Margin  =	Net Operating income
	Sales
=	$800,000+$330,000
	$8,400,000+$1,900,000
=	$1,130,000	= 10.971%
	$10,300,000

    

Turnover =	Sales
	Average operating assets
=	$8,400,000+$1,900,000
	$3,200,000+$800,000
=	$10,300,000	= 2.575
	$4,000,000

  

ROI	= Margin × Turnover
	= 10.971% × 2.575 = 28.25%