The target return on net worth (return on investment) is typically around which percentage?

• A. 10%
• B. 15%
• C. 25%
• D. 20%

Answer: (D)

Return on net worth shows how effectively owners’ capital is being turned into profit. It’s calculated as net income divided by owners’ equity. A target around twenty percent is common because it provides a meaningful return that compensates for risk and the cost of tying up capital, yet it’s achievable for many steady businesses without taking on excessive risk. Ten percent is usually too low to justify the risk and opportunity cost, while fifteen percent is sometimes seen but isn’t the typical benchmark, and twenty-five percent would require higher margins or leverage with greater risk. So, aiming for about twenty percent aligns with standard expectations for a healthy, value-creating return.