Question

Results from Pioneer Corporation's most recent year of operations are presented in the following table. B (blick the icon to view the information.) Requirements 1. Calculate the sales margin, capital turnover, and return on investment (ROI). 2. Calculate the residual income (RI).

Answer 1

Hello,

1)

Sales margin
Operating income	8800	a
Sales	35200	b
Sales margin	25%	c=a/b
Capital turnover
Sales	35200	a
Current assets*	16000	b
Current liabilities	4300	c
Working capital	11700	d=b-c
Capital turnover	3.01	e=a/d
*I assumed that total assets = current assets
Return on Investment
Operating income	8800	a
Total assets	16000	b
ROI	55%	c=a/b

2)

Residual Income
Operating income	8800	a
Minimum return on capital	1232	b=a*14%
Residual income	7568

Thanks!