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In: Accounting

Bear Paints is a national paint manufacturer and retailer. The company is segmented into five divisions:...

Bear Paints is a national paint manufacturer and retailer. The company is segmented into five divisions: Paint Stores (branded retail locations), Consumer (paint sold through home improvement stores), Automotive (sales to auto manufacturers), International, and Administration. The following is selected divisional information for its two largest divisions: Paint Stores and Consumer.

Net Sales

Operating Income

Average Total Assets

Paint Stores

$3,690,000.00

$408,000.00

$1,405,000.00

Consumer

1,529,000.00

168,000.00

1,580,000.00

Management has specified a 21% target rate of return.

  1. Calculate each division’s ROI. Round all of your answers to four decimal places.

  2. Calculate each division’s profit margin ratio. Interpret your results.

  3. Calculate each division’s asset turnover ratio. Interpret your results.

  4. Use the expanded ROI formula to confirm your results from Requirement 1. Interpret your results.

  5. Calculate each division’s RI. Interpret your results and offer a recommendation for any division with (-) RI.

  6. Describe some of the factors that management considers when setting its minimum target rate of return.

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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