Answer:
Return on investment (ROI) =
7%.
Explanation:
a) Sales Revenue = $500
Profit = $70
Gross margin ratio = 13%
Gross profit = $65 (13% of $500)
Cost of goods sold = $435 ($500 - 65)
Rate of return = 10%
Asset turnover ratio = 0.4
Asset = $500 / 0.4 = $1,250
Cost of Investment = Asset - Current Liabilities
= $1,250 - 250
= $1,000
ROI = Profit/Total investment
= $70/$1,000 * 100
= 7%
b) The Return on Investment (ROI) is a financial performance measure which evaluates the returns from an investment in order to determine the efficiency of the investment. ROI is calculated by taking the benefit (or return) of the investment and dividing it by the cost of the investment. The resulting figure is expressed as a percentage or a ratio.
