EXPANDED ROI ( RETURN ON INVESTMENT )FORMULA : Management often restates the ROI formula to determine what drive's a company's ROI. This is widely known as expanded ROI formula. This can be calculated by multiplying profit margin ration and asset turnover ratio. (EXPANDED) ROI = NET PROFIT SALES × SALES AVERAGE TOTAL ASSETS = NET PROFIT SALES An expanded ROI shows two components. a) Profit margin i.e. How much profit the company earns on every $1.00 sales b) Asset turnover i.e. How efficiently a company uses its assets to generate sales. AVERAGE TOTAL ASSETS: The average total assets is the average of the aggregate assets during a two year period. ASSETS = TOTAL ASSETS(CURRENT YEAR)+TOTAL ASSETS(PREVIOUS YEAR 2 To determine: To use the expanded ROI formula to confirm the results from Requirement 10 and interpret the results

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 24, Problem 13CP

To determine

EXPANDED ROI (RETURN ON INVESTMENT)FORMULA : Management often restates the ROI formula to determine what drive's a company's ROI. This is widely known as expanded ROI formula. This can be calculated by multiplying profit margin ration and asset turnover ratio.

$(EXPANDED) ROI = \frac{NET PROFIT}{SALES} \times \frac{SALES}{AVERAGE TOTAL ASSETS} = \frac{NET PROFIT}{SALES}$

An expanded ROI shows two components.

a) Profit margin i.e. How much profit the company earns on every $1.00 sales

b) Asset turnover i.e. How efficiently a company uses its assets to generate sales.

AVERAGE TOTAL ASSETS: The average total assets is the average of the aggregate assets during a two year period.

$ASSETS = \frac{TOTAL ASSETS(CURRENT YEAR)+TOTAL ASSETS(PREVIOUS YEAR}{2}$

To determine:

To use the expanded ROI formula to confirm the results from Requirement 10 and interpret the results

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 24, Problem 13CP

To determine

EXPANDED ROI (RETURN ON INVESTMENT)FORMULA : Management often restates the ROI formula to determine what drive's a company's ROI. This is widely known as expanded ROI formula. This can be calculated by multiplying profit margin ration and asset turnover ratio.

$(EXPANDED) ROI = \frac{NET PROFIT}{SALES} \times \frac{SALES}{AVERAGE TOTAL ASSETS} = \frac{NET PROFIT}{SALES}$

An expanded ROI shows two components.

a) Profit margin i.e. How much profit the company earns on every $1.00 sales

b) Asset turnover i.e. How efficiently a company uses its assets to generate sales.

AVERAGE TOTAL ASSETS: The average total assets is the average of the aggregate assets during a two year period.

$ASSETS = \frac{TOTAL ASSETS(CURRENT YEAR)+TOTAL ASSETS(PREVIOUS YEAR}{2}$

To determine:

To use the expanded ROI formula to confirm the results from Requirement 10 and interpret the results

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 24, Problem 13CP

To determine

EXPANDED ROI (RETURN ON INVESTMENT)FORMULA : Management often restates the ROI formula to determine what drive's a company's ROI. This is widely known as expanded ROI formula. This can be calculated by multiplying profit margin ration and asset turnover ratio.

$(EXPANDED) ROI = \frac{NET PROFIT}{SALES} \times \frac{SALES}{AVERAGE TOTAL ASSETS} = \frac{NET PROFIT}{SALES}$

An expanded ROI shows two components.

a) Profit margin i.e. How much profit the company earns on every $1.00 sales

b) Asset turnover i.e. How efficiently a company uses its assets to generate sales.

AVERAGE TOTAL ASSETS: The average total assets is the average of the aggregate assets during a two year period.

$ASSETS = \frac{TOTAL ASSETS(CURRENT YEAR)+TOTAL ASSETS(PREVIOUS YEAR}{2}$

To determine:

To use the expanded ROI formula to confirm the results from Requirement 10 and interpret the results

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 24, Problem 13CP

To determine