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Last year a company had sales of $400,000, a turnover of 2.4, and a return on investment of 36%. The company's net operating income for the year was: Multiple Choice $144,000 $120,000 $80,000 $60,000

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Answer:

The company's net operating income for the year was: $60,000

Explanation:

Return on investment (ROI) is calculated by using following formula:

ROI = Net income/Total investment

Net Income = ROI x Total investment

Investment Turnover Ratio = Net Sales/(Stockholders' Equity + Debt)

or

Investment Turnover Ratio = Net Sales/Total investment

Total investment = Net Sales/Investment Turnover Ratio

The company had sales of $400,000, a turnover of 2.4, and a return on investment of 36%.

Net Income = ROI x Total investment = ROI x Net Sales/Investment Turnover Ratio = 36% x $400,000/2.4 = $60,000

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