A family friend has asked your help in analyzing the operations of three anonymo
ID: 2478777 • Letter: A
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.) Please show work and solutions!!!
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.) Please show work and solutions!!!
Explanation / Answer
Return on investment = Net income/average operating assets*100
WN1: A
16% = net income/162000*100
Net income = $25920
WN2: B
15% = 45000/Average operating assets * 100
Average operating assets = $300000
WN3: Minimum required rate of return = Minimum return/average operating assets*100
B : Minimum required rate of return = 47000/300000*100
= 15.67%
WN4: residual income = net income - minimum required income
A B C Sales 350000 700000 630000 Net operating income 25920 (WN1) 45000 Average operating assets 162000 300000 147000 Return on investment 16 15 16170+7000 =23170 Minimum required rate of return: Percentage 16 15.67 (WN3) 11 Dollar Amount 25920 47000 147000*11% =16170 Residual Income Nil 47000-45000= -2000 (WN4) 7000Related Questions
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