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9 March, 05:32

Largo Company recorded for the past year sales of $510,000 and average operating assets of $255,000. What is the margin that Largo Company needed to earn in order to achieve an ROI of 14%

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  1. 9 March, 07:55
    0
    Answer: 7%

    Explanation:

    Turnover = Sales

    Average operating assets is $255,000 = 2.0

    Turnover = $510,000

    ROI = Margin x Turnover

    14% = Margin x 2.0

    Margin = 7%
  2. 9 March, 09:07
    0
    The margin needed is 7 %

    Explanation:

    The return in investment evaluates the gains or losses from an investment over a period of time. The return on investment can be calculated with the expression below;

    Return on investment (ROI) = Net operating income / Average operating asset

    Given ROI = 14 %

    Average operating asset = $255,000

    Net operating income = ROI x Average operating asset

    = 14% x $255,000

    = $ 35700

    The net operating income can be used to obtain the margin as follows;

    Margin = Net Operating Income / Sales x 100

    Margin = $ 35700 / $510,000 x 100

    = 0.07 x 100

    = 7 %

    Therefore the margin needed by Largo Company to earn is 7 %
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