Exercise 11-9 Return on Investment (ROI) and Residual Income Relations [LO11-1,
ID: 2453582 • Letter: E
Question
Exercise 11-9 Return on Investment (ROI) and Residual Income Relations [LO11-1, LO11-2]
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.)
Exercise 11-9 Return on Investment (ROI) and Residual Income Relations [LO11-1, LO11-2]
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.)
Company A B C Sales $340,000 $690,000 $650,000 Net operating income $42,000 Average operating assets $152,000 $156,000 Return on investment (ROI) 22 % 21 % % Minimum required rate of return: Percentage 16 % % 15 % Dollar amount $56,000 Residual income $8,000Explanation / Answer
Residual income = Net operating income - ( Average operating assets - minimum rate of return)
ROI = Net operating income / Average operating assets
A B C Sales $340,000 $690,000 $650,000 Net operating income 33,440 42,000 31,400 Average operating assets $152,000 $200,000 $156,000 ROI 22% 21% 20.13% minimum required rate of return Percentage 16% 28% 15% Dollar amount $24,320 $56,000 $23,400 Residual income $9,120 ($14,000) $8,000Related Questions
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