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 indicated by a minus sign. Round your percentage answers to nearest whole percent and other amounts to whole dollars.) Company B А 350,000 $ $ 580,000 $ $ 690,000 39,000 $ $ 158,000 153,000 17% 19% Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return: Percentage Dollar amount Residual income 16 % $ 51,000 $ 6,000

Answer 1

Company A В с Sales Net Operating income Average Operating assets Return on investments (ROI) Minimum required rate of return: $ $ 6,90,000 5,80,000 3,50,000 $ $ $ $ 39,000 $ $ 23,380 26,010 2,05,263 19% 1,53,000 1,58,000 17% 15% 16% 25 % 11% Percentage Dollar amount $ $ 24,480 51,000 17,380 Residual income $ 1,530 -12,000 6,000 Workings & Explanations: Calculation For Company A Net Operating income = Average Operating assets* Return on investments (ROI) =$153,000 17 % =$26,010 Minimum required rate of return dollar amount Average Operating assets* percentage = $153,000* 16% = $ 24,480 Residual income Net Operating income Dollar amount = $26,010-24,480 = $ 1,530 Calculation For Company B Average Operating assets Net Operating income/ Return on investments (ROI) $39,000 19% $205,263 Minimum required rate of return percentage= (dollar amount/ Average Operating assets)*100 ($ 51000/ 205,263 ) *100 =25% Residual income Net Operating income Dollar amount =$ 39,000 - $51,000 $ 12,000

Calculation For Company C Minimum required rate of return dollar amount Average Operating assets * percentage = $158,000 11% =$17,380 Net Operating income = Dollar amount Residual income =$17,380 6,000. = $23,380 Return on investments (ROI) (Net Operating income/ Average Operating assets ) *100 ($23,380 158,000) *100 15%