Chapter 9, Problem 3PA

The income statement comparison for Forklift Material Handling shows the income statement for the current and prior year.

A. Determine the operating income (loss) (dollars) for each year.

B. Determine the operating income (percentage) for each year.

C. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the return on investment. Was the decision to invest additional assets in the company successful? Explain.

D. Assuming an 8% cost of capital, calculate the residual income for each year. Explain how this compares to your findings in part C.