Compute and interpret the expanded ROI equation (Learning Objective 3) Zeldas, a national…
Compute and interpret the expanded ROI equation (Learning Objective 3)
Zeldas, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type : Professional and Residential. Assume that the following divisional information was available for the past year (in thousands of dollars):
Management has a 25% target rate of return for each division .
Requirements
1. Calculate each division's ROI. Round all of your answers to four decimal places.
2. Calculate each division's sales margin. Interpret your results .
3. Calculate each division's capital turnover. Interpret your results .
4. Use the expanded ROI formula to confirm your results from Requirement 1. What can you conclude?
5. Calculate each division's residual income (RI). Interpret your results .