Ramsey Automotive Ltd

question 34

Essay

Ramsey Automotive Ltd. had sales of $3,500,000 and net operating income of $900,000 last year. Operating assets last year averaged $1,500,000. The company's manager is considering the purchase of a new machine which is expected to increase average operating assets by 20%.
Required: Calculate the company's new ROI if the new machine is purchased.

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Definitions:

Net Cash

Net cash refers to the amount of cash that remains after subtracting a company's total cash outflows from its total cash inflows, indicating the company's liquidity position.

Income Taxes

Charges imposed by the authorities on earnings from companies and individuals within their territory.

Cash Receipts

The collection of money, including coins, currency, checks, and electronic payments, received by a business during a given period.