Question

Furniture Division: Year 1 Year 2 Sales $35,000,000 $37,500,000 Operating income 1,400,000 1,500,000 Average operating assets 10,000,000 10,000,000 Houseware Division: Year 1 Year 2 Sales $12,000,000 $12,500,000 Operating income 600,000 500,000 Average operating assets 5,000,000 5,000,000 Required: Enter the ROI and margin ratios as whole percentage values (for example, enter 10% as "10"). Round the turnover ratio to two decimal places. 1. Compute the ROI and the margin and turnover ratios for each year for the Furniture Division. Furniture Division ROI Margin Turnover Year 1 % % Year 2 % % 2. Compute the ROI and the margin and turnover ratios for each year for the Houseware Division. Houseware Division ROI Margin Turnover Year 1 % %

Answer 1

ROI Furniture Division Margin 14% 4% 15% 4% Year 1 Turn over 3.50 3.75 Year 2 ROI Housing Division Margin 12% 5% 10% 4% Turn over 2.40 Year 1 Year 2 2.50

Explanation:

Furniture Division: ROI = Net operating income / Average operating assets Year 1 Year2 Net operating income 1400000 1500000 Average operating assets 10000000 10000000 ROI 14% 15% Margin = (Income / Sales)*100 1400000 1500000 Net operating income Sales Margin 35000000 37500000 4% 4% Turn over = Net Sales / Average operating assets Sales 35000000 Average operating assets 10000000 Turn over 3.50 37500000 10000000 3.75

Housing Division: ROI = Net operating income / Average operating assets Year 1 Year2 Net operating income 600000 500000 Average operating assets 5000000 5000000 ROI 12% 10% Margin = (Income / Sales)*100 600000 500000 Net operating income Sales Margin 12000000 12500000 4% 5% Turn over = Net Sales / Average operating assets Sales 12000000 Average operating assets 5000000 Turn over 2.40 12500000 5000000 2.50