Real-Life Math
Accounting and math skills go hand in hand. "You definitely have to know your way around numbers," says CMA Greg Mattan.
One of the accounting calculations used to judge how a company is doing is called the return on investment (ROI). A CMA may use this formula to advise the company's officials on the business's performance. In some industries, a 10 percent return is considered good. In others, a 40 percent return is considered average.
You work for a company that grows and sells apples. The typical rate of return for a company in this business is 10 percent. Your company uses $250,000 worth of assets to produce the apples.
This year's apple market was rather soft, so the highest price per box of apples was $15. The company sold 18,700 boxes. The net income for each box was 6 percent of the selling price.
The president wants to know what the return on investment was for this year. He's got estimated returns of investments for other companies in the industry. They are 8 percent, 5 percent, 4 percent and 7 percent.
This is the formula used to calculate the return on investment:
ROI = (Sales / Assets) x (Income / Sales)
What was the return on investment for your company and how did it compare to the average ROI of other companies in the same field?