Return on investment (ROI) is often expressed as follows: Income Investment Read the requirements. Income Revenues Revenues Investment Requirements Requirement 1. What advantages are there in the breakdown of the computation into two separate components? Selec a. The importance of investment turnover as a key to income is stressed. b. The importance of revenues is explicitly recognized. The important components are expressed as ratios or percentages instead of dollar figures. 1. What advantages are there in the breakdown of the computation into two separate components? 2. Fill in the blanks for the following table: C. d. The breakdown stresses the possibility of trading off investment turnover for income as a percentage of revenues. Requirement 2. Fill in the blanks for the following table: (Enter investment turnover to the nearest tenth, X.X.) Companies in Same Industry Revenues Income Company A Company B Company C Revenues $ 1,400,000 $ 1,100,000 Income $ 210,000 $ 165,000 Investment $ 700,000 $ 5,500,000 Income as a percentage of revenues % % 1.5% Investment turnover 2.0 ROI % 3% % A $ $ Investment $ Companies in Same Industry B 1,400,000 $1,100,000 210,000 $ 165,000 700,000 ? $ 5,500,000 с ? ? Income as a percentage of revenues ? ? 1.5% Investment turnover ? ? 2 ROI ? 3% ? After filling in the blanks, comment on the relative performance of these companies as thoroughly as the data permit. Print Done
Return on investment (ROI) is often expressed as follows: Income Investment Read the requirements. Income Revenues Revenues Investment Requirements Requirement 1. What advantages are there in the breakdown of the computation into two separate components? Selec a. The importance of investment turnover as a key to income is stressed. b. The importance of revenues is explicitly recognized. The important components are expressed as ratios or percentages instead of dollar figures. 1. What advantages are there in the breakdown of the computation into two separate components? 2. Fill in the blanks for the following table: C. d. The breakdown stresses the possibility of trading off investment turnover for income as a percentage of revenues. Requirement 2. Fill in the blanks for the following table: (Enter investment turnover to the nearest tenth, X.X.) Companies in Same Industry Revenues Income Company A Company B Company C Revenues $ 1,400,000 $ 1,100,000 Income $ 210,000 $ 165,000 Investment $ 700,000 $ 5,500,000 Income as a percentage of revenues % % 1.5% Investment turnover 2.0 ROI % 3% % A $ $ Investment $ Companies in Same Industry B 1,400,000 $1,100,000 210,000 $ 165,000 700,000 ? $ 5,500,000 с ? ? Income as a percentage of revenues ? ? 1.5% Investment turnover ? ? 2 ROI ? 3% ? After filling in the blanks, comment on the relative performance of these companies as thoroughly as the data permit. Print Done
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Return on investment (ROI) is often expressed as follows:
Income
Investment
Read the requirements.
Income
Revenues
Revenues Investment
Requirements
Requirement 1. What advantages are there in the breakdown of the computation into two separate components? Selec
a. The importance of investment turnover as a key to income is stressed.
b.
The importance of revenues is explicitly recognized.
The important components are expressed as ratios or percentages instead of dollar figures.
1. What advantages are there in the breakdown of the computation into two
separate components?
2. Fill in the blanks for the following table:
C.
d. The breakdown stresses the possibility of trading off investment turnover for income as a percentage of revenues.
Requirement 2. Fill in the blanks for the following table: (Enter investment turnover to the nearest tenth, X.X.)
Companies in Same Industry
Revenues
Income
Company A
Company B
Company C
Revenues
$
1,400,000 $
1,100,000
Income
$
210,000 $
165,000
Investment
$
700,000
$ 5,500,000
Income as a percentage of revenues
%
%
1.5%
Investment turnover
2.0
ROI
%
3%
%
A
$
$
Investment
$
Companies in Same Industry
B
1,400,000 $1,100,000
210,000 $
165,000
700,000 ? $ 5,500,000
с
?
?
Income as a percentage of
revenues
?
?
1.5%
Investment turnover
?
?
2
ROI
?
3%
?
After filling in the blanks, comment on the relative performance of these companies
as thoroughly as the data permit.
Print
Done
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