A Firm's After-Tax Operating Income Was $1,000,000 in 2016

question 97

Multiple Choice

A firm's after-tax operating income was $1,000,000 in 2016.It started the year with total capital of $8,000,000 and raised an additional $1 million of capital during the year.The additional capital raised during 2016 only started to affect the operating income in 2017.Which value best represents the return on capital for 2016?

• A) 12.5%
• B) 11.8%
• C) 11.1%
• D) 10.0%

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Definitions:

Financial Forecast

A prediction of future revenues, expenses, and profits of a company, used for budgeting and strategic planning.

Fixed Assets

Assets that are purchased for long-term use and are not likely to be converted quickly into cash, such as buildings, land, and machinery.

Pro Forma Financial Statements

Financial statements that project the financial position of a company, based on certain assumptions and typically used for future planning.

Sales Forecast

A sales forecast is the process of estimating future sales. Accurate sales forecasts enable companies to make informed business decisions and predict short-term and long-term performance.