Question

In: Accounting

Return on investment​ (ROI) is often expressed as​ follows: Income / Investment = Income / Revenues...

Return on investment​ (ROI) is often expressed as​ follows: Income / Investment = Income / Revenues x Revenues / Investment

1. What advantages are there in the breakdown of the computation into two separate​ components?

2. Fill in the blanks for the following​ table:

Companies in Same Industry

A

B

C

Revenues

$1,600,000

$1,300,000

?

Income

$96,000

$78,000

?

Investment

$800,000

?

$2,600,000

Income as a percentage of revenues

?

?

1.5

%

Investment turnover

?

?

2

ROI

?

3

%

?

After filling in the​ blanks, comment on the relative performance of these companies as thoroughly as the data permit.

Solutions

Expert Solution

A B C
REVENUE 1600000 1300000

5200000

[REVENUE/INVESTMENT = INVESTMENT TURNOVER]
INCOME 96000 78000

78000

[INCOME/5200000]=0.015
INVESTMENT 800000

2600000

[78000/INVESTMENT] = 0.03

 2600000
INCOME AS % OF REVENUES

6%

[96000/1600000]

6%

[78000/1300000]

 1.5
INVESTMENT TURNOVER

2

[1600000/800000]

0.5

[1300000/2600000]

 2
ROI [96000/800000]12% 3%

3%

[78000/2600000]

ekkarill92 answered 3 years ago
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