ECONOMICS

Detailed explanation-1: -ROI (return on investment) equals sales margins divided by the firm’s capital turnover ratio. This equation requires first finding the sales margin and then the capital turnover ratio; then dividing the former by the latter.

Detailed explanation-2: -Your return on investment, or ROI, is basically the return on your product. While the margin indicates your unit profit in absolute terms, or in relation to the sales price, you calculate the ROI as the unit contribution margin divided by your purchase price.

Detailed explanation-3: -Therefore, When the operating profit ratio is 25% and the capital turnover ratio is 2% the ROI is 50%.

Detailed explanation-4: -Return on sales is calculated by dividing your business’s operating profit by your net revenue from sales.