Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow :
|Net operating income||$792,000||$2,900,000|
|Average operating assets||$2,475,000||$14,500,000|
1. For each division, compute the return on investment (ROI) in terms of margin and turnover.
2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 17%. Compute the residual income for each division.
3. Is Yokohama's greater amount of residual income an indication that it is better managed?
Return on Investment:
Return on investment refers to profit or loss generated from the invested amount in the business. We can measure the return on investment by dividing net operating income with leverage operating asset.
Answer and Explanation:
Return on investment = Net Income / Average operating assets
ROI of Osaka= 792,000 / 2,475,000 * 100 = 32 %
ROI of Yokohama = 2900,000 /...
See full answer below.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from Intro to Business: Help and ReviewChapter 25 / Lesson 6