Fitness Fanatics is a regional chain of health clubs. The managers of the clubs,
ID: 2431795 • Letter: F
Question
Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The company's Springfield Club reported the following results for the past year:
Assume that the manager of the club is able to increase sales by $75,000 and that, as a result, net operating income increases by $5,625. Further assume that this is possible without any increase in operating assets. What would be the club’s return on investment (ROI)? (Round your percentage answers to 2 decimal places (i.e., 0.1234 should be considered as 12.34%.))
Assume that the manager of the club is able to reduce expenses by $3,000 without any change in sales or operating assets. What would be the club’s return on investment (ROI)? (Round your percentage answers to 2 decimal places (i.e., 0.1234 should be considered as 12.34%.))
Assume that the manager of the club is able to reduce operating assets by $40,000 without any change in sales or net operating income. What would be the club’s return on investment (ROI)? (Round your percentage answers to 2 decimal places (i.e., 0.1234 should be considered as 12.34%.))
Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The company's Springfield Club reported the following results for the past year:
Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Sales 750,000.00 Net operating income 15,000.00 Average operating assets 100,000.00 Return on Investment = 15,000/100,000 15.00% Scenario 1 Sales = 750000 + 75000 825,000.00 Net operating income =15000 + 5625 20,625.00 Average operating assets 100,000.00 Return on Investment = 20,625/100,000 20.63% Scenario 2 Sales 750,000.00 Net operating income = 15000 + 3000 18,000.00 Average operating assets 100,000.00 Return on Investment = 18,000/100,000 18.00% Scenario 3 Sales 750,000.00 Net operating income 15,000.00 Average operating assets = 100,000 - 40,000 60,000.00 Return on Investment = 15,000/60,000 25.00%
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