Question

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	$	850,000
Net operating income	$	25,500
Average operating assets	$	100,000

The following questions are to be considered independently.

2. Assume that the manager of the club is able to increase sales by $85,000 and that, as a result, net operating income increases by $7,225. Further assume that this is possible without any increase in average operating assets. What would be the club’s return on investment (ROI)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

1. Compute the Springfield club’s return on investment (ROI). (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below:

Sales	$	17,000,000
Net operating income	$	6,300,000
Average operating assets	$	36,600,000

Required:

1. Compute the margin for Alyeska Services Company. (Round your answer to 2 decimal places.)

2. Compute the turnover for Alyeska Services Company. (Round your answer to 2 decimal places.)

3. Compute the return on investment (ROI) for Alyeska Services Company. (Round your intermediate calculations and final answer to 2 decimal places.)

Answer 1

NOTE: As per HOMEWORKLIB POLICY, only one question is allowed to answer at a time, so here first question is being answered :

(2)

new net operating income = $25500 + $7225 = $32725

return on investment = net operating income/average operating assets

= $32725/$100000 = $32.73%

(1)

return on investment = net operating income/average operating assets

= $25500/$100000 = $25.50%

note: the question numbers are flipped in the question posted.