Question

Required information Exercise 11-11 Effects of Changes in Profits and Assets on Return on Investment (ROI) [LO11-1] [The following information applies to the questions displayed below.] Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The company's Springfield Club reported the following results for the past year: Sales 930,000 $ 35,340 Net operating income Average operating assets 100,000 The following questions are to be considered independently. Exercise 11-11 Part 4 4. Assume that the manager of the club is able to reduce average operating assets by $40,000 without any change in sales or net operating income. What would be the club's return on investment (ROI)? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Return on investment (ROI)

Answer 1

Return on investment = Net operating income/Revised annual operating assets

= 35,340/(100,000-40,000)

= 35,340/60,000

= 58.90%

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