Using ROI and RI to evaluate investment centersZims, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: professional and residential. The following divisional information was available for the past year:Management has 21 26% target rate of return for each division.RequirementsCalculate each division’s ROI. Round all of your answers to four decimal places.Calculate each division’s profit margin ratio. Interpret your results.Calculate each division’s asset turnover ratio. Interpret your results.Use the expanded ROI formula to confirm your results from Requirement 1. What can you conclude. Net Sales Revenue Operating Income Average Total AssetsResidential$ 550,0001,090,000$ 65,280164,820$ 192,000402,000ProfessionalManaecment bar

1. Calculate each division’s ROI. Round all of your answers to four decimal places.

Answered: Net Sales Revenue Operating Income…

Net Sales Revenue Operating Income Average Total Assets Residential $ 550,000 1,090,000 $ 65,280 164,820 $ 192,000 402,000 Professional Manaecment bar

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.5.1MBA

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Question

Using ROI and RI to evaluate investment centers

Zims, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: professional and residential. The following divisional information was available for the past year:

Management has 21 26% target rate of return for each division.

Requirements

Calculate each division’s ROI. Round all of your answers to four decimal places.
Calculate each division’s profit margin ratio. Interpret your results.
Calculate each division’s asset turnover ratio. Interpret your results.
Use the expanded ROI formula to confirm your results from Requirement 1. What can you conclude.

Net Sales Revenue Operating Income Average Total Assets
Residential
$ 550,000
1,090,000
$ 65,280
164,820
$ 192,000
402,000
Professional
Manaecment bar

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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