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

Business

Alannah Robertson

23 November, 08:42

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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Sydnee Orr · 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.