Question

    A company has a profit margin of 20% and asset turnover

    of 4 times. What is the company‘s return on investment?
    A 5% Correct Answer Incorrect Answer
    B 80% Correct Answer Incorrect Answer
    C 25% Correct Answer Incorrect Answer
    D 65% Correct Answer Incorrect Answer
    E 50% Correct Answer Incorrect Answer

    Solution

    Return on investment (RoI) can be estimated here from = Net profit/total assets Net profit margin = net profit/total sales and Asset turnover = total sales /total assets As such, RoI = Net profit * Asset turnover = 20% *4  = 80%

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