Evaluate the performance of the two divisions assuming UEI uses return on investment (ROI). **Universal Electronics, Inc. (UEI) Overview**Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Commercial. Both divisions invest heavily in Research and Development (R&D), which is assumed to benefit the company over five years. The R&D spending is made uniformly throughout the year. UEI operates with a cost of capital of 11 percent.**Financial Information for the Two Divisions (in thousands of dollars):**- **Consumer Division:** - Sales Revenue: $22,000 - Divisional Income: $3,850 - Divisional Investment: $27,500 - Current Liabilities: $1,000 - R&D: $1,000- **Commercial Division:** - Sales Revenue: $37,000 - Divisional Income: $3,885 - Divisional Investment: $27,750 - Current Liabilities: $800 - R&D: $1,000**Objective:**Evaluate the performance of the two divisions using Return on Investment (ROI).**Performance Evaluation Table:**| Division | ROI (%) ||-----------------------|---------|| ROI of Consumer Division | || ROI of Commercial Division | || Which division performed better? | |**Explanation:**The table is meant to be filled in with calculated ROI percentages for each division. The ROI is a measure of the efficiency of an investment or a comparison of the profitability of several investments. The division with the higher ROI is considered to have performed better.

Return on investment is one of the profitability measure under which net income is being analysed as a pecent of total investment. Division, which has more ROI has performed better than the other.ROI = Net Income/ Investment Since both the division has equal ROI, 14%, so both the divisions performed better.

Answered: Evaluate the performance of the two…

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Evaluate the performance of the two divisions assuming UEI uses return on investment (ROI).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Evaluate the performance of the two divisions assuming UEI uses return on investment (ROI).

**Universal Electronics, Inc. (UEI) Overview**

Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Commercial. Both divisions invest heavily in Research and Development (R&D), which is assumed to benefit the company over five years. The R&D spending is made uniformly throughout the year. UEI operates with a cost of capital of 11 percent.

**Financial Information for the Two Divisions (in thousands of dollars):**

- **Consumer Division:**
- Sales Revenue: $22,000
- Divisional Income: $3,850
- Divisional Investment: $27,500
- Current Liabilities: $1,000
- R&D: $1,000

- **Commercial Division:**
- Sales Revenue: $37,000
- Divisional Income: $3,885
- Divisional Investment: $27,750
- Current Liabilities: $800
- R&D: $1,000

**Objective:**
Evaluate the performance of the two divisions using Return on Investment (ROI).

**Performance Evaluation Table:**

| Division | ROI (%) |
|-----------------------|---------|
| ROI of Consumer Division | |
| ROI of Commercial Division | |
| Which division performed better? | |

**Explanation:**
The table is meant to be filled in with calculated ROI percentages for each division. The ROI is a measure of the efficiency of an investment or a comparison of the profitability of several investments. The division with the higher ROI is considered to have performed better.

Formula Formula ROI (%) = Net Income Principal Amount × 100

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