Q A : Woollen Inc., evaluates its divisions as investment centers. The sales, in
ID: 2472353 • Letter: Q
Question
Q A: Woollen Inc., evaluates its divisions as investment centers. The sales, income and assets of its three divisions follow. Calculate return on investments for each division. Which division is best?
Division A
Division B
Division C
Sales
$800,000
$800,000
$800,000
Profit
$80,000
$160,000
$320,000
Assets
$600,000
$7,900,000
$4,000,000
Question B: Using the chart from question #A, calculate the return on investment using the Du Pont method.
Explain each step.
Division A
Division B
Division C
Sales
$800,000
$800,000
$800,000
Profit
$80,000
$160,000
$320,000
Assets
$600,000
$7,900,000
$4,000,000
Explanation / Answer
Return on investments = Net income / total ssets
Division A = 80000 / 600000 * 100 = 13.33%
Division B = 160000 / 7900000 * 100 = 2.03%
Division C = 320000 / 4000000 * 100 = 8%.
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