Required information (The following information applies to the questions display

Question

Required information (The following information applies to the questions displayed below. ness 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 $ 740,000 $ 14,060 100,000 The following questions are to be considered independently Required: 1. Compute the Springfield club's return on investment (RO) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Return on investment (ROI)

Explanation / Answer

1)ROI =Net operating income /Average operating asset

          = 14060/100000

            = 14.06%

2)New Netoperating income : 14060+ 5476 = 19536

ROI = 19536 /100000

         = .1954 OR 19.54%

3)Decrease in operating expense by 2960 will increase operating income to 14060+2960 = 17020

ROI = 17020 /100000

       = .1702 OR 17.02%

4)ROI = 14060 /(100000-20000)

         14060/80000

            .1758 OR 17.58%

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