Fashion Forward, Inc. is decentralized into two divisions which are investment centers: Men’s Wear and Women’s Wear. For the past year, the Women’s Wear division had the following ratios: Return on Investment 27% Profit Margin 15% Investment Turnover 1.8 The following data relates to the Men’s Wear division for the past year. Sales $18,000,000 Cost of goods sold $12,000,000 Operating expenses $4,200,000 Invested assets $10,000,000 Question A) Calculate the investment turnover for the Men’s Wear division for the past year (show work) Question B) For the division with the lower ROI, which ratio (profit margin or investment turnover) should the manager try to improve in order to raise the ROI of the division? What does the manager need to do in order to improve the ratio (profit margin or investment turnover) you chose?
Fashion Forward, Inc. is decentralized into two divisions which are investment centers: Men’s Wear and Women’s Wear.
For the past year, the Women’s Wear division had the following ratios:
Profit Margin 15%
Investment Turnover 1.8
The following data relates to the Men’s Wear division for the past year.
Sales $18,000,000
Cost of goods sold $12,000,000
Operating expenses $4,200,000
Invested assets $10,000,000
Question A) Calculate the investment turnover for the Men’s Wear division for the past year (show work)
Question B) For the division with the lower ROI, which ratio (profit margin or investment turnover) should the manager try to improve in order to raise the ROI of the division? What does the manager need to do in order to improve the ratio (profit margin or investment turnover) you chose?
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