Question

A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Loss amounts should be indicated by a minus sign. Round your percentage answers to nearest whole percent and other amounts to whole dollars.)

Company
A		B		C
Sales	$300,000		$680,000		$640,000
Net operating income			$41,000
Average operating assets	$159,000				$150,000
Return on investment (ROI)	25	%	16	%		%
Minimum required rate of return:
Percentage	15	%		%	14	%
Dollar amount			$52,000
Residual income					$8,000

Answer 1

Solution:

Company
A		B		C
Sales	300000		680000		640000
Net operating income	39750		41000		29000
Average operating assets	159000		256250		150000
Return on investment (ROI)	25	%	16	%	19	%
Minimum required rate of return:
Percentage	15	%	20	%	14	%
Dollar amount	23850		52000		21000
Residual income	15900		-11000		8000

ROI = Net Operating Income / Average Operating Assets

Min Required RAte of return ( Percentage) * Average Operating Assets = Dollar Amount

Residual Income = Net Income - Dollar Amount.