Step Up Ladders Company provides the following financial information: Income from operations $400,000 Interest expense 47,000 Gains / (losses) on sale of equipment 3,000 Net income 350,000 Total assets at Jan. 1 2,600,000 Total assets at Dec. 31 3,400,000 Calculate return on investment based on the information given above. (Round your answer to two decimal places.)

Question

Arthur Payne

Business

3 January, 00:30

Step Up Ladders Company provides the following financial information: Income from operations $400,000 Interest expense 47,000 Gains / (losses) on sale of equipment 3,000 Net income 350,000 Total assets at Jan. 1 2,600,000 Total assets at Dec. 31 3,400,000 Calculate return on investment based on the information given above. (Round your answer to two decimal places.)

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Answers (1)

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Marin Melendez · Answer 1

13.33%

Explanation:

Income from operations $400,000

Interest expense 47,000

Gains / (losses) on sale of equipment 3,000

Net income 350,000

Total assets at Jan. 1 2,600,000 Total assets at Dec. 31 3,400,000

the formula used to calculate return on investment (ROI) is:

ROI = income from operations / average total assets

ROI = $400,000 / { ($2,600,000 + $3,400,000) / 2} = $400,000 / $3,000,000 = 0.1333 or 13.33%

Return on investment measures the profitability of an investment during a period of time.