Johnson Cleaners
| Data |
|
| Sales |
$25,000,000 |
| Net operating income |
$3,000,000 |
| Average operating assets |
$10,000,000 |
| Minimum required rate of return |
25% |
Enter a formula into each of the cells marked with a ? below
Review Problem: Return on Investment (ROI) and Residual Income
| Compute the ROI |
|
| Margin |
? |
| Turnover |
? |
| ROI |
? |
|
|
| Compute the residual income |
|
| Average operating assets |
? |
| Net operating income |
? |
| Minimum required return |
? |
| Residual income |
? |
Requirement:
Revise the data in your worksheet as follows:
What is the ROI?
What is the residual income?
Why is the residual income positive?
Average operating assets exceed net operating income
The ROI is less than the minimum required rate of return
Sales exceed net operating income
Sales exceed average operating assets
The ROI exceeds the minimum required rate of return
The ROI equals the minimum required rate of return