Waldron inc. is considering selling to a group of new customers that will bring in credit sales of $24,000 with a return on sales of 5%. the only new investment will be in accounts receivable. waldron has a turnover ratio of 6 to 1 between sales and accounts receivable. what is waldron inc.'s expected return on investment?

30%

Explanation:

The computation of return on investment is shown below:-

Return on Sales = Credit sales * Return on sales

= $24,000 * 5%

= $1,200

Investment in Accounts Receivable

= $24,000 * 1 : 6

= $4,000

Return on Investment = Return on Sales : Investment in Accounts Receivable * 100

= $1,200 : $4,000 * 100

= 30%

Therefore for computing the return on investment we simply divide the investment in account receivable by return on sales.