Question
In: Accounting
Return on investment (ROI) is often expressed as follows: Income / Investment = Income / Revenues...
Return on investment (ROI) is often expressed as follows: Income / Investment = Income / Revenues x Revenues / Investment
1. What advantages are there in the breakdown of the computation into two separate components?
2. Fill in the blanks for the following table:
|
Companies in Same Industry |
||||||
|
A |
B |
C |
||||
|
Revenues |
$1,600,000 |
$1,300,000 |
? |
|||
|
Income |
$96,000 |
$78,000 |
? |
|||
|
Investment |
$800,000 |
? |
$2,600,000 |
|||
|
Income as a percentage of revenues |
? |
? |
1.5 |
% |
||
|
Investment turnover |
? |
? |
2 |
|||
|
ROI |
? |
3 |
% |
? |
||
After filling in the blanks, comment on the relative performance of these companies as thoroughly as the data permit.
Solutions
Expert Solution
| A | B | C | |
| REVENUE | 1600000 | 1300000 |
5200000 [REVENUE/INVESTMENT = INVESTMENT TURNOVER] |
| INCOME | 96000 | 78000 |
78000 [INCOME/5200000]=0.015 |
| INVESTMENT | 800000 |
2600000 [78000/INVESTMENT] = 0.03 |
2600000 |
| INCOME AS % OF REVENUES |
6% [96000/1600000] |
6% [78000/1300000] |
1.5 |
| INVESTMENT TURNOVER |
2 [1600000/800000] |
0.5 [1300000/2600000] |
2 |
| ROI | [96000/800000]12% | 3% |
3% [78000/2600000] |
ekkarill92 answered 2 years agoRelated Solutions
What are the strengths and weaknesses of using Residual Income (RI), Return on Investment (ROI), or...
What are the strengths and weaknesses of using Residual Income
(RI), Return on Investment (ROI), or Economic Value Added (EVA®) as
methods to evaluate management performance? Which method would you
like to be assessed by, if you were a manager? Would it make a
difference if you were in charge of a department, plant, or major
division? Why or why not? Support you answer with examples.
Mastery Problem: Return on Investment, margin, and turnover Return on Investment (ROI) The manager of an...
Mastery
Problem: Return on Investment, margin, and turnover
Return on
Investment (ROI)
The manager of an
investment center should be evaluated based on revenues, costs, and
investments. An evaluation based on net income ignores the amount
of investment the investment center required. One way to measure
operating profit in relation to investment is a calculation called
the return on investment.
One formula for calculating return on investment is:
Operating income
Invested Assets
ROI is effective
because it takes into consideration...
Mastery Problem: Return on Investment, margin, and turnover Return on Investment (ROI) The manager of an...
Mastery
Problem: Return on Investment, margin, and turnover
Return on
Investment (ROI)
The manager of an
investment center should be evaluated based on revenues, costs, and
investments. An evaluation based on net income ignores the amount
of investment the investment center required. One way to measure
operating profit in relation to investment is a calculation called
the return on investment.
One formula for calculating return on investment is:
Operating income
Invested Assets
ROI is effective
because it takes into consideration...
Explain in detail what is Return of Investment (ROI) & Discounted Return on Investment (DROI).
Explain in detail what is Return of Investment (ROI) &
Discounted Return on Investment (DROI).
1. A shortcoming of return on investment (ROI) is that it may not lead managers to...
1. A shortcoming of return on investment (ROI) is that it may
not lead managers to accept good investment
opportunities if
a.
ROI of the investment is higher than the present ROI of the
division.
b.
the ROI of the investment is the same as the present ROI of the
division.
c.
the ROI of the investment is lower than the present ROI of the
division.
d.
None of the answers is correct.
2. Which of the following statements...
1. A) Select the themes of design using Return on Investment ROI (Rate of Return) method,...
1. A) Select the themes of design using
Return on Investment ROI (Rate of Return)
method, the data of both equipment are shown the
table below,
B) Compare the effect of decrease in initial
cost of 5% on the rate of return for equipment A (calculate the %
of change in ROI).
Theme I
Theme II
Initial cost (OR)
75000
81000
Annual revenues (OR/yr)
24000
24000
O&M annual cost ((OR/yr)
5400
2700
Salvage value (OR)
2700
5400
Useful life (Years)...
Determine the marketing return on sales (marketing ROS) and return on marketing investment (marketing ROI) for...
Determine the marketing return on sales (marketing ROS) and
return on marketing investment (marketing ROI) for Company A and
Company B in the table below. Which company is performing
better?
Company A
Company B
Net Sales
$2,000,000
850,000
Cost of Goods Sold
$350,000
$325,000
Sales Expenses
$300,000
$150,000
1. Calculate the marketing ROI for each company in the
table below. (Round to the nearest whole number.)
Company A
Company B
Marketing ROI
______%
______%
What is the acceptable return on investment (ROI) for Tax Preparation Business and how is it...
What is the acceptable return on investment (ROI) for Tax
Preparation Business and how is it calculated?
Problem 10-20 Return on Investment (ROI) Analysis [LO10-1] The contribution format income statement for Huerra Company...
Problem 10-20 Return on Investment (ROI) Analysis [LO10-1]
The contribution format income statement for Huerra Company for
last year is given below:
Total
Unit
Sales
$
992,000
$
49.60
Variable expenses
595,200
29.76
Contribution margin
396,800
19.84
Fixed expenses
318,800
15.94
Net operating income
78,000
3.90
Income taxes @ 40%
31,200
1.56
Net income
$
46,800
$
2.34
The company had average operating assets of $491,000 during the
year.
Required:
1. Compute the company’s return on investment (ROI) for the...
Problem 11-20 Return on Investment (ROI) Analysis [LO11-1] The contribution format income statement for Huerra Company...
Problem 11-20 Return on Investment (ROI) Analysis [LO11-1]
The contribution format income statement for Huerra Company for
last year is given below: Total Unit Sales $ 992,000 $ 49.60
Variable expenses 595,200 29.76 Contribution margin 396,800 19.84
Fixed expenses 316,800 15.84 Net operating income 80,000 4.00
Income taxes @ 40% 32,000 1.60 Net income $ 48,000 $ 2.40 The
company had average operating assets of $508,000 during the
year.
Required:
1. Compute the company’s return on investment (ROI) for the...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- THIS PROGRAM HAS TO BE WRITTEN IN C Single function to perform the parity computation on...
- Consider a buffer system consisting of Benzoic acid (pKa = 4.20) and sodium benzoate, a) Would...
- Decision Variables S T Minimize 1.8S + 2.20T Subject to: Potassium 5S + 8T >= 200...
- A neurologist needs to counsel a stroke victim and her husband about possible outcomes, treatment options,...
- Case Study: Personal Beliefs in the Workplace Don Shakow was a prominent professional who worked in...
- 1: Competency framework usage is the modern best practice in management. What is meant by competency...
- A 19.34 g mixture of sugar (C12H22O11) and table salt (NaCl) is dissolved in 231 g...
ADVERTISEMENT