Utah Contractor Practice Exam

A builder's return on investment after one year with sales of $85,000 and net profit of $9,500, starting with $100,000 is?

1. 6.5%

2. 9.5%

3. 10%

4. 12.8%

The correct answer is: 9.5%

To determine the builder's return on investment (ROI) after one year, the correct approach involves using the ROI formula, which is: \[ \text{ROI} = \frac{\text{Net Profit}}{\text{Investment}} \times 100\% \] In this case, the net profit is $9,500, and the investment amount is $100,000. Plugging these values into the formula gives: \[ \text{ROI} = \frac{9,500}{100,000} \times 100\% \] This calculation results in: \[ \text{ROI} = 0.095 \times 100\% = 9.5\% \] This shows that after one year, the builder achieved a return of 9.5% on the initial investment of $100,000, which reflects a healthy profit margin relative to the amount invested. This indicates effective management and successful operations in generating profit within the established timeframe. The distinction of the investment's performance is crucial when evaluating business success and efficiency.