Fitness Fanatics is a regional chain of health clubs. The managers of the clubs,
ID: 2520920 • 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: Sales $ 850,000 Net operating income $ 25,500 Average operating assets $ 100,000
6.value: 10.00 pointsRequired information Required: 1. Compute the Springfield club’s return on investment (ROI). (Round your Turnover answer to 2 decimal places. Round your Margin and ROI percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) rev: 08_01_2016_QC_CS-56541
7.value: 10.00 pointsRequired information 2. Assume that the manager of the club is able to increase sales by $85,000 and that, as a result, net operating income increases by $7,225. Further assume that this is possible without any increase in operating assets. What would be the club’s return on investment (ROI)? (Round your Turnover answer to 2 decimal places. Round your Margin and ROI percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)
8.value: 10.00 pointsRequired information 3. Assume that the manager of the club is able to reduce expenses by $3,400 without any change in sales or operating assets. What would be the club’s return on investment (ROI)? (Round your Turnover answer to 2 decimal places. Round your Margin and ROI percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)
9.value: 10.00 pointsRequired information 4. Assume that the manager of the club is able to reduce operating assets by $50,000 without any change in sales or net operating income. What would be the club’s return on investment (ROI)? (Round your Turnover answer to 2 decimal places. Round your Margin and ROI percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)
Explanation / Answer
Return on Investment = Net Operating Income /Operating Assets
Requirement 1:
= 25500/100000 = 25.50
Requirement 2:
=25500+7225/100000 = 32.76
Requirement 3:
=25500+3400/100000 = 28.90
Requirement 4
=25500/50000 = 51.00
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