**Investment Center Analysis: ROI and Residual Income**Romano Corporation has three operating divisions and requires a 12% return on all investments. Selected information is presented here:| | Division X | Division Y | Division Z ||-----------------------|------------|------------|------------|| Revenues | $1,000,000 | ? | ? || Operating Income | $120,000 | ? | $100,000 || Operating Assets | $500,000 | $300,000 | ? || Margin | ? | 12% | ? || Turnover | ? | 1 turn | 2 turns || ROI | ? | ? | ? || Residual Income | ? | ? | $25,000 |**Explanation:**- **Revenues:** The total income generated by the division from sales of goods or services.- **Operating Income:** Profits remaining after operating expenses are deducted from revenues.- **Operating Assets:** Assets used for generating income for the company.- **Margin:** Income per dollar of revenue; operating income divided by revenues.- **Turnover:** The ratio of revenues to operating assets; an indicator of how efficiently assets are used.- **ROI (Return on Investment):** A measure of the profitability of the division relative to its assets.- **Residual Income:** The net income generated after the company has met the minimum required return on its operating assets.This table highlights key financial metrics to assess the performance and profitability of each division, ensuring alignment with the company's financial targets. **Exercise: Division Performance Analysis**1. **Calculate the missing amounts for each division.**2. **Comment on the relative performance of each division.**3. **Provide an example to show how residual income improves decision making at the divisional level.**

Return on Investment(ROI):-It helps in measuring the profit which company is earning from the…

Investment center analysis; ROI and residual income Romano Corporation has three operating divisions and requires a 12% return on all investments. Selected information is presented here: Division X Division Y Division Z Revenues Operating income Operating assets Margin. $1,000,000 $ 120,000 $ 500,000 $100,000 $300,000 12% Turnover 1 turn 2 turns ROI, ? Residual income ? $25,000

Investment center analysis; ROI and residual income Romano Corporation has three operating divisions and requires a 12% return on all investments. Selected information is presented here: Division X Division Y Division Z Revenues Operating income Operating assets Margin. $1,000,000 $ 120,000 $ 500,000 $100,000 $300,000 12% Turnover 1 turn 2 turns ROI, ? Residual income ? $25,000

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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