Homework Answers
Answer :
(1)
| Operating Income | ÷ | Average total Assets | = | ROI |
| 100,000 | ÷ | 500,000 | = | 20.00% |
Average total assets = (584,000+416,000)/2 = 500,000
(2)
| Operating Income | ÷ | Sales | = | Profit margin |
| 100,000 | ÷ | 1,000,000 | = | 10.00% |
(3)
| Sales | ÷ | Average total assets | = | Asset turnover |
| 1,000,000 | ÷ | 500,000 | = | 2.00 times |
(4)
| Profit Margin | x | Asset turnover | = | ROI(expanded) |
| 10.00% | x | 2 | = | 20.00% |
(5)
| Operating Income | - | Average total assets x Target rate of return | = | Residual Income(RI) |
| 100,000 | - | 500,000 x 10% | = | 50,000 |
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