Tuesday, April 15, 2008

Calculate Invested Capital

A database company reports a return on investment of 10%, a capital turnover of 8, and an income of $180,000. Using only this information, the company's invested capital is:

ROI = income/sales x sales/capital
10% = 180,000/sales x 8
sales = 14,400,000

Investment turnover ratio = sales/capital
8 = 14,400,000/capital
Capital = 1,800,000

Additional Help:
Expanded ROI Formula
Ratio Analysis and Financial Control

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