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 formula for calculating asset turnover?

Explain how to arrive at the final ROI calculation using sales margin and asset turnover.