Return on Investment and Residual Income The Emergency Medical Services Company has two divisions that operate independently of one another. The financial data for the year 20X5 reported the following results: Sales Operating income 1,170,000 Taxable income 965,000 Investment 6,000,000 North South The company's desired rate of return is 10%. Income is defined as operating income. a. What are the respective return-on-investment ratios for the North and South divisions? Round ROI to the nearest whole percentage. North South $4,680,000 $4,180,000 North $ South $ ROI % % b. What are the respective residual incomes of the North and South divisions? Residual Income + 970,000 690,000 5,000,000 c. Which division has the better return on investment and which division has the better residual income figure? Return on investment Residual income
Return on Investment and Residual Income The Emergency Medical Services Company has two divisions that operate independently of one another. The financial data for the year 20X5 reported the following results: Sales Operating income 1,170,000 Taxable income 965,000 Investment 6,000,000 North South The company's desired rate of return is 10%. Income is defined as operating income. a. What are the respective return-on-investment ratios for the North and South divisions? Round ROI to the nearest whole percentage. North South $4,680,000 $4,180,000 North $ South $ ROI % % b. What are the respective residual incomes of the North and South divisions? Residual Income + 970,000 690,000 5,000,000 c. Which division has the better return on investment and which division has the better residual income figure? Return on investment Residual income
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Return on Investment and Residual Income
The Emergency Medical Services Company has two divisions that operate independently of one another. The financial data for the year 20X5 reported the following results:
Sales
Operating income
Taxable income
Investment
The company's desired rate of return is 10%. Income is defined as operating income.
a. What are the respective return-on-investment ratios for the North and South divisions?
Round ROI to the nearest whole percentage.
North
South
North $
South $
b. What are the respective residual incomes of the North and South divisions?
Residual Income
North South
$4,680,000 $4,180,000
1,170,000 970,000
965,000 690,000
6,000,000 5,000,000
◆
ROI
%
%
c. Which division has the better return on investment and which division has the better residual income figure?
Return on investment
Residual income
+
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