Question

Largo Company recorded for the past year sales of $498,600 and average operating assets of $277,000. What is the margin that Largo Company needed to earn in order to achieve an return on investment (ROI) of 30.6%?

Answer 1

Answer:

The margin needed is 17%

Explanation:

The computation of the margin is shown below:

As we know that

Margin = Net operating income ÷ sales × 100

where,

net operating income is

= ROI × average operating assets

= 30.60% × $277,000

= $84,762

Now the margin is

= $84,762 ÷ $498,600 × 100

= 17%

Hence, the margin needed is 17%

We simply applied the above formula so that the correct value could come

And, the same is to be considered