In: Accounting
Refer to the following data regarding the three departments from Magenta: Bright Magenta Standard Magenta Dark Magenta Total assets $ 2,400,000 $ 1,000,000 $ 200,000 Total liability $2,000,000 $ 800,000 $125,000 Revenues $ 1,200,000 $ 1,000,000 $ 280,000 Operating profit $ 240,000 $ 130,000 $ 35,000 The company uses a required rate of return of 12% for its departments. Management wants to evaluate the performance of its three departments for deciding which departmental manager is to be promoted. Required a) Which is the department with (i) the higher Return on Sales (ROS), (ii) the higher Return on Investment (ROI), and (iii) the higher Residual Income (RI)? b) The board has set a target ROI of 20% for the Dark Magenta division. What alternatives does the department have for attaining this return?
If you need more points on the second part search ways to increase roi and many will come .
Hope it helps you.
All the best ?