Required information Exercise 11-11 Effects of Changes in Profits and Assets on

Question

Required information Exercise 11-11 Effects of Changes in Profits and Assets on Return on Investment (ROI) [LO11-1] The following information applies to the questions displayed below. 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: Sales Net operating income Average operating assets $ 940,000 $ 36,660 $ 100,000 The following questions are to be considered independently Exercise 11-11 Part 2 2. Assume that the manager of the club is able to increase sales by $94,000 and that, as a result, net operating income increases by $8,836. Further assume that this is possible without any increase in average operating assets. What would be the club's return on investment (ROI)? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Return on investment (ROI 11930

Explanation / Answer

Return on Investment (ROI) = Net operating income / Cost of Investment = 45,496/100,000 45.50% Net operating income = $(36,660+8,836) = $45,496

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