Question

answer with details or by law

increase in return on investment (ROI), assuming Which of the following will not result in a other factors remain the same? A. A reduction in expenses. B. An increase in net operating income C. An increase in operating assets D. An increase in sales. 4. The Northern Division of the Smith Come last year. If the minimum required rate of return Company had average operating assets totaling $150,000 a Northem was $20,000, then the residual income return is 12%, and if last year's net operating income Northern last year was: A. $20,000 B. $18,000 C. $5,000 D. $2,000 5. Return on investment (ROI) is equal to the margin multiplied by: A. sales. B. turnover. C. average operating assets. D. residual income. Ceder Products is a division of a major corporation. Last year the division had total sales of $21.520,000, net operating income of $538,000, and average operating assets of $8,000,000. The company's minimum required rate of return is 18%. 6. The division's margin is closest to: A. 2.5% B. 39.7% C. 6.7% D. 37.2% 7. The division's turnover is closest to: A. 2.52 B. 0.07 C. 40.00 D. 2.69

Answer 1

3]	ROI = Net operating income (Sales-Expenses)/Net operating assets
	Answer: [C]
	When net operating assets increases, the denominator
	alone increases, thereby pushing down the ROI.
	In all the other cases the numerator will increase,
	thereby pushing up the ROI.
4]	Residual income = Net operating income/Average operating assets*Minimum required rate of return.
	=20000-150000*12% =	$               2,000
	Answer: [D]
5]	ROI = Net operating income/Net operating assets
	This can be the product of two ratios--Operating profit margin*Asset turnover
	That is, ROI = (Operating profit/Sales)*(Sales/Operating assets)
	Answer: [B] Turnover.
6]	Division's margin = 538000/21520000 =	2.50%
	Option: [A]
7]	Division's turnover =21520000/8000000 =	2.69
	Option: [D]