Fitness Fanatics is a regional chain of health clubs. The managers of the clubs,
ID: 2579039 • Letter: F
Question
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:
The following questions are to be considered independently.
2. Assume that the manager of the club is able to increase sales by $76,000 and that, as a result, net operating income increases by $5,776. 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.)
Sales $ 760,000 Net operating income $ 15,960 Average operating assets $ 100,000Explanation / Answer
return on investment (ROI) = Net operating income / Average operating assets
return on investment (ROI) = ($15,960+$5,776) / $100,000
return on investment (ROI) = 21.736%
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