A family friend has asked your help in analyzing the operations of three anonymo

Question

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: (Loss amounts should be indicated by a minus sign. Round your percentage answers to nearest whole percent and other amounts to whole dollars.)

Company A B C Sales $370,000 $690,000 $560,000 Net operating income $53,000 Average operating assets $170,000 $147,000 Return on investment (ROI) 24 % 20 % % Minimum required rate of return: Percentage 14 % % 12 % Dollar amount $46,000 Residual income $6,000

Explanation / Answer

ROI=Net operating income/Average operating assets

Minimum required return=Average operating assets*Minimum required rate of return

Residual income=Net operating income-Minimum required return

A B C Sales 370,000 690,000 560,000 Net operating income 40800 53000 23640 Average operating assets 170,000 265000 147000 ROI 24% 20% 16%(Approx). Minimum required rate of return: Percentage 14% 17%(Approx). 12% Dollar amount 23800 46000 17640 Residual income 17000 7000 6000

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