Asked by Vanessa Grossman on May 18, 2024
Verified
Haney Fabrication is a division of a major corporation. Last year the division had total sales of $21,560,000, net operating income of $1,897,280, and average operating assets of $7,000,000. The company's minimum required rate of return is 16%.Required:What is the division's return on investment (ROI)?
Return On Investment (ROI)
A financial metric used to evaluate the efficiency of an investment, calculated as net profit divided by the cost of the investment.
Net Operating Income
A financial metric that calculates the profit generated from a company's normal business operations, excluding expenses and incomes from non-operational activities.
Operating Assets
Assets utilized in the regular course of business operations to generate revenues, such as machinery, buildings, and equipment.
- Compute the return on investment (ROI) for a specific division in a corporation.
- Compute and elucidate financial performance indicators, including margin, turnover, and residual income.
Verified Answer
LM
Lelethu MgusheloMay 21, 2024
Final Answer :
Return on investment = Net operating income ÷ Average operating assets = $1,897,280 ÷ $7,000,000 = 27.1%
Learning Objectives
- Compute the return on investment (ROI) for a specific division in a corporation.
- Compute and elucidate financial performance indicators, including margin, turnover, and residual income.