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ZNet Co. is a web-based retail company. The company reports the following for the past year. Sales $ 5,000,000 Operating income 1,000,000 Average invested assets 12,500,000 The company’s CEO believes that sales for next year will increase by 20% and both profit margin (%) and the level of average invested assets will be the same as for the past year. 1. Compute return on investment for the past year. 2. Compute profit margin for the past year. 3. If the CEO’s forecast is correct, what will return on investment equal for next year? 4. If the CEO’s forecast is correct, what will investment turnover equal for next year?

Financial & Managerial Accounting

Financial & Managerial Accounting

13th Edition

ISBN:9781285866307

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter23: Performance Evaluation For Decentralized Operations

Section: Chapter Questions

Problem 23.17EX

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Exercise 22-15 Return on investment LO A1, A2

ZNet Co. is a web-based retail company. The company reports the following for the past year.


Sales	$	5,000,000
Operating income		1,000,000
Average invested assets		12,500,000

The company’s CEO believes that sales for next year will increase by 20% and both profit margin (%) and the level of average invested assets will be the same as for the past year.

1. Compute return on investment for the past year.
2. Compute profit margin for the past year.
3. If the CEO’s forecast is correct, what will return on investment equal for next year?
4. If the CEO’s forecast is correct, what will investment turnover equal for next year?

Exercise 22-15 Return on investment LO A1, A2
ZNet Co. is a web-based retail company. The company reports the following for the past year.
Sales
$ 5,000,000
Operating income
Average invested assets
1,000,000
12,500,000
The company's CEO believes that sales for next year will increase by 20% and both profit margin (%) and the level of average invested
assets will be the same as for the past year.
1. Compute return on investment for the past year.
2. Compute profit margin for the past year.
3. If the CEO's forecast is correct, what will return on investment equal for next year?
4. If the CEO's forecast is correct, what will investment turnover equal for next year?
Complete this question by entering your answers in the tabs below.
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Compute return on investment for the past year.
Return on Investment
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Choose Denominator:
Return on Investment
=
Return on investment
%3D
%3D
Required 1
Required 2 >

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