Terra Company has two divisions, the Retail Division and the Wholesale Division.

Question

Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year: Retail Division Wholesale Division Operating income $ 2,500,000 $ 6,000,000 Operating assets $ 16,000,000 $ 36,000,000 Terra Company has set a target return on investment (ROI) of 15% for both divisions. Based on ROI, which division appears to have performed better? Multiple Choice Retail division. Wholesale division. Both divisions have the same results. The answer cannot be determined using the information provided.

Explanation / Answer

ROI Retail Division = 2500000/16000000= 15.63% ROI Wholesale Division = 6000000/36000000= 16.67% Wholesale division appears to have performed better based on ROI

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