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Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama....

Question:

Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow :

Division Division
Osaka Yokohama
Sales $9,900,000 $29,000,000
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?

Yes OR

No

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:

Answer 1

Return on investment = Net Income / Average operating assets

ROI of Osaka= 792,000 / 2,475,000 * 100 = 32 %

ROI of Yokohama = 2900,000 /...

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Return on Investment: Definition, Formula & Example

from Intro to Business: Help and Review

Chapter 25 / Lesson 6
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