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: R O I = O p e r a t i n g I n c o m e A v e r a g e t o t a l a s s e t s R O I ( E x p a n d e d ) = O p e r a t i n g I n c o m e S a l e s × S a l e s A v e r a g e t o t a l a s s e t s Or R O I = P r o f i t M a r g i n R a t i o × A s s e t T u r n o v e r r a t i o To calculate: The ROI for each division.

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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 = Operating IncomeAverage total assets

ROI (Expanded)= Operating IncomeSales ×SalesAverage total assets

Or

ROI = Profit Margin Ratio ×Asset Turnover ratio

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 = Operating IncomeAverage total assets

ROI (Expanded)= Operating IncomeSales ×SalesAverage total assets

Or

ROI = Profit Margin Ratio ×Asset Turnover ratio

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

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