Question

ework ? Saved Help Saw 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) Company Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return s 370,000 740,000 S51,000 500,000 S 164,000 S 152.000 251% 191% 181% 12% Percentage Dollar amount S48,000 8,000 Residual income KPrey11 of 17 E Next >

Answer 1

Answer:

Company	A	B	C
Sales	370,000	740,000	500,000
Net operating income	41000	51000	26240
Average operating assets	164000	268421	152000
Return On ivestment (ROI)	25%	19%	17.26%
Minimum required return
Percentage	18%	17.88%	12%
Dollar amount	29520	48000	18240
Residual Income	11480	3000	8000

Working notes for the above answer is as under

Company A

1

Return on investment

=Net operating income/Average operating assets

25%= Net operating income/164000

Net operating income=164000*25%

Net operating income=41,000

2

Minimum required return in dollar

= Average operating assets* Minimum required return in %

=164,000*18%

=29520

3

Residual Income

=41000-29250

=11480

________________________________

Company B

Average operating assets

=51000/19%
=268421

Minimum required return in %

=Minimum required return in dollar/Average operating assets

=480000/268421

=17.88%

________________________________

465 466 468 469 470 471 472 473 474 475 476 477 Company Sales Net operating income Average operating assets Return On ivestment (RO Minimum required return Percentage Dollar amount Residual Income 370000 +1471*1470 164000 0.25 740000 51000 =+1469/1471 0.19 -+K474+K475 152000 +K469/K470 -+J474/1470 0.18 +1470*1473 +1469-1474 0.12 -+K470*K473 8000 +J469-J474