Fitness Fanatics is a regional chain of health clubs. The managers of the clubs,
ID: 2579040 • 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.
3. Assume that the manager of the club is able to reduce expenses by $3,040 without any change in sales or 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+$3,040)/$100,000
return on investment (ROI) = 19%
Reduction of expenses will result an increase in net income
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