Chapter 14, Problem 14.5.6C

To determine

Concept Introduction:

Return on investment (ROI):

Return on investment is a profitability ratio that represents the percentage return on the investment made. It is calculated by dividing the Net Income by the Average total assets. The formulas to calculate the ROI are as follows:

  $ROI =\frac{OperatingIncome}{Averagetotalassets}$

  $ROI (Expanded)=\frac{OperatingIncome}{Sales}\times \frac{Sales}{Averagetotalassets}$

Or

  $ROI=ProfitMarginRatio\times AssetTurnoverratio$

To Indicate:

The alternative measure to motivate the manager to accept the new product line and to increase the overall company return