Distribution of Profit

A business$$s owners want to reinvest $80\%$ of their $$100,000$ after$-$tax profit in their business and use the rest to repay the principal on their loan. The business$$s revenue for the year was $$1,700,000.$ They intend to reinvest $40\%$ in working capital and $60\%$ in non$-$current assets. What is the company$$s ROR? Calculate the distribution of the after$-$tax profit.

Solution

The company$$s ROR is $5\mathrm{.}9\%($$$100,000-$: $$1,700,000)$ or $$0\mathrm{.}059$ for each revenue dollar.

$$80,000($$$100,000$ X $80\%)$ will be reinvested in the business.

$$32,000(40\%$ of $$80,000)$ will be spent on working capital.

$$48,000(60\%$ of $$80,000)$ will be spent on non$-$current assets.