Question

A family friend has asked your help In analyzing the operations of three anonymous companies operating In the same service sector Industry. Supply the missing data In the table below (Loss amounts should be Indiceted by a minus sign. Round your percentage answers to nearest whole percent and other amounts to whole dollars.) Company S 750,000 53,000 Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return: 320,000 500,000 162,000 151,000 15% 201% Percentage 171% 11% Dollar amount 58,000 Residual income 7.000

Answer 1

Return on Investment = Net operating income / Average operating assets

Minimum required rate of return dollar amount = (Average operating assets * Minimum required rate of return percentage)

Residual income = Net operating income - Minimum required rate of return dollar amount

	Company A	Company B	Company C
Sales	320,000	750,000	500,000
Net operating income	24,300 (162,000*15%)	53,000	23,610 (7,000+16,610)
Average operating assets	162,000	265,000 (53,000/20%)	151,000
Return on investment (ROI)	15%	20%	16% (23,610/151,000)
Minimum required rate of return :
Percentage	17%	22%(58,000/265,000)	11%
Dollar amount	27,540 (162,000*17%)	58,000	16,610 (151,000*11%)
Residual income	-3,240 (24,300-27,540)	-5,000 (53,000-58,000)	7,000