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Sales $ 110,000,000
Invested capital $ 55,000,000
Net income $ 3,300,000
E10-31( similar to) p. 396
Lucy Company has assets of $ 2.2 million and long-term, 10 % debt of $ 1,200,000. Ethel Company has assets of $ 2.2 million and no long-term debt. The annual operating income( before interest) of both companies is $ 550,000. Ignore taxes.
Return on investment( ROI) is calculated as income divided by invested capital. To apply ROI, we must measure invested capital. However, there are many different interpretations of this concept. To understand what ROI figures really mean for a particular company, you