The Central Division of American, Inc., has operating income of $16,500 on sales revenue of $192,000....
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The Central Division of American, Inc., has operating income of $16,500 on sales revenue of $192,000. Divisional operating assets are $84,500, and management of American has determined that a minimum return of 14% should be expected from all investments. |
| Required: | ||
| a. |
Using the DuPont model, calculate The Central Division’s margin, turnover, and ROI. (Do not round your intermediate calculations and round final answers to 2 decimal places.) |
|
| Central Division | ||
| Margin | % | |
| Turnover | turns | |
| ROI |
% |
|
| b. | Calculate The Central Division’s residual income. | |
Homework Answers
a. DuPont Performance Analysis:
Margin = Operating income / Sales = $16,500 / $192,000 = 8.59%
Turnover = Sales / Operating assets = $192,000 / $84,500 = 2.27 turns
ROI = Operating income / Operating assets = $16,500 / $84,500 = 19.53%
b. Residual Income Analysis:
Residual income = Operating income - Required ROI
Residual income = $16,500 - ($84,500 × 14%)
Residual income = $4,670
Add Answer to:
The Central Division
of American, Inc., has operating income of $16,500 on sales revenue
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