Return on Investment - Margin and Turnover

The video tutorial explains the concept of Return on Investment (ROI) and its calculation methods. It starts with a basic understanding of ROI as the value received from an investment. The common method of calculating ROI is by dividing operating income by operating assets. The tutorial then introduces an alternative method using margin and turnover, where ROI is calculated by multiplying profit margin by asset turnover. It further details how to calculate sales margin by subtracting discounts, allowances, and costs from revenue, and explains asset turnover as net sales divided by average total assets. Finally, it combines these to calculate ROI.

What is the basic formula for calculating ROI?

• Operating income divided by operating assets

• Net profit divided by total sales

• Total revenue minus total expenses

• Net income divided by total liabilities

How do you calculate the sales margin?

• Revenue minus cost of goods sold and selling expenses

• Total sales minus operating expenses

• Net income divided by total assets

• Revenue minus total liabilities

Which of the following is subtracted from revenue to calculate sales margin?

• Net profit

• Total liabilities

• Operating income

• Sales discounts and allowances

What is the formula for asset turnover?

• Operating income divided by total liabilities

• Net profit divided by total revenue

• Total assets divided by net sales

• Net sales divided by average total assets

What do you multiply to calculate ROI using margin and turnover?

• Sales margin and asset turnover

• Net profit and total revenue

• Operating income and total liabilities

• Total assets and net sales