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calculate return on investment 5 marks Net income = 40000 Interest expense = 10000 Income tax expense = 20000 Liabilities = 150000 Common share = 150000 Retained earnings = 60000

Solution:

 

ROI = operating income / stockholder +liabilities *100

 

ROI = 70000/360000*100

 

ROI = 19.44%

 

 

 

ROI = (EBIT / Capital employed) * 100

 

(40+10+20 / 150 + 150 + 60) * 100

 

70,000 / 360,000  *  100 = 19.44%

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