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Certified Management Accountant

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Real-Life Math -- Solution

You need to calculate the return on investment (ROI).

ROI = (Sales / Assets) x (Income / Sales)

Sales = $15 x 18,700
Sales = $280,500

Assets = $250,000

Income = $280,500 x 0.06
Income = $16,830

ROI = [($280,500 / $250,000) x ($16,830 / $280,500)] x 100
ROI = [1.122 x 0.06] x 100
ROI = 0.067 x 100
ROI = 6.7 percent

To calculate the average ROI of other firms:

Average = (8 + 4 + 5 + 7) / 4
Average = 6 percent

The company did slightly better than average when compared with the average of ROIs of companies in the same field.


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