Question - Ration AnalysisCompany A has a capital of $ 1,000,000;it's turnover is 3 times the...

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Question - Ration AnalysisCompany A has a capital of $ 1,000,000;it's turnover is 3 times the capital and the margin on sales is 6%.What is the return on investment ?

Robert · Accepted Answer

SOLUTION :
Capital turnover ratio = Sales/Capital
Or 3 = Sales/$1,000,000
Or Sales = $3,000,000
Gross profit = 6% of Sales i.e 6% of $3,000,000
Or Gross profit = $1,80,000
Rate of return on investment = Gross Profit/Investment x100
= $1,80,000/$1,000,000 x 100
= 18%

Question - Ration Analysis Company A has a capital of $ 1,000,000;it's turnover is 3 times the capital and the margin on sales is 6%.What is the return on investment ?

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