Exercise 9-8 Return on Investment (ROI) and Residual Income Relations [LO1, LO2]
ID: 2376507 • Letter: E
Question
Exercise 9-8 Return on Investment (ROI) and Residual Income Relations [LO1, LO2]
A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Negative amounts should be indicated with a minus sign. Do not round immediate calculations, but round your final answers to the nearest whole number.)
Company
A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Negative amounts should be indicated with a minus sign. Do not round immediate calculations, but round your final answers to the nearest whole number.)
Explanation / Answer
Company
A
B
C
Sales
$ 340,000
$ 720,000
$ 670,000
Net operating income
$
$ 37,000
$
Average operating assets
$ 163,000
$
$ 145,000
Return on investment (ROI)
25%
19%
%
Minimum required rate of return:
Percentage
15%
%
9%
Dollar amount
$
$ 54,000
$
Residual income
$
$
$ 5,000
Company
A
B
C
Sales
$ 340,000
$ 720,000
$ 670,000
Net operating income
$
$ 37,000
$
Average operating assets
$ 163,000
$
$ 145,000
Return on investment (ROI)
25%
19%
%
Minimum required rate of return:
Percentage
15%
%
9%
Dollar amount
$
$ 54,000
$
Residual income
$
$
$ 5,000
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