Question

Requirement 1. Calculate each division's ROL Round all of your answers to four decimal places Begin by selecting the formato calculate return on investment (RO), and then enter the amounts to calculate each division's ROLE er your answer as a percent rounded to two decimal places Operating income Average total assets Residential Professional Requirement 2. Calculate each division's profit margin rabie Interpret your results Begin by colecting the formula to catculate profit margin ratio, and then enter the amounts to calculate Data The Professional Net Sales Revenue Operating Income Average Total Assets 530,000 S 63.700 $ TO DOO 1,030,000 166.400 416 000 The rede d in istoring abouts of operating income on each dollar of Requirement. C e sach don' t understorprol your result Management has a 29 target of retum for each division Residential Paint Done Professional of net revenue for each Bar of average total invested. The professional division is generating about of he to confirm your results from Requirement What can you conhecer you as a percent rounded to the decimal places r The residential division is genering about Requirements. Use the expanded ROI fou Fint select the expanded ROI fonds e

Answer 1

1.ROI = Net operating income/Average operating assets

Residential = 63,700/196,000 = 32.5%

Professional = 166,400/416,000 = 40%

2.Profit margin = net operating income/sales

Residential = 63,700/530,000 = 12.0189%

Professional = 166,400/1,030,000 = 16.1553%

Professional is more efficient

3.Investment Turnover = Sales/Average operating assets

Residential = 530,000/196,000 = 2.7041

Professional =1,030,000/416,000 = 2.4760

Residential is more efficient

Residential generating $2.70 sales revenue per dollar of investment

4.ROI = Margin*Turnover

Residential = 12.0189%*2.7041 = 32.5%

Professional = 16.1553%*2.4760 = 40%

Yes, answers agree