Chapter 11, Problem 11.8E

1.

To determine

Concept Introduction:

Return on investment (ROI):

Return on investment is a profitability ratio that represents the percentage return on the investment made. It is calculated by dividing the Net Income by the Average total assets. The formulas to calculate the ROI are as follows:

  $ROI =\frac{OperatingIncome}{Averagetotalassets}$

  $ROI (Expanded)=\frac{OperatingIncome}{Sales}\times \frac{Sales}{Averagetotalassets}$

Or

  $ROI=ProfitMarginRatio\times AssetTurnoverratio$

To calculate: The ROI for each division.

2.

To determine

Concept Introduction:

Return on investment (ROI):

Return on investment is a profitability ratio that represents the percentage return on the investment made. It is calculated by dividing the Net Income by the Average total assets. The formulas to calculate the ROI are as follows:

  $ROI =\frac{OperatingIncome}{Averagetotalassets}$

  $ROI (Expanded)=\frac{OperatingIncome}{Sales}\times \frac{Sales}{Averagetotalassets}$

Or

  $ROI=ProfitMarginRatio\times AssetTurnoverratio$

To identify: The division managers who is doing the better job.