Question

	Tom	James	Laura	Ralph
Revenue	$600,000	$800,000	$900,000	$750,000
Net operating income	$30,000	$40,000	$45,000	$75,000
Average operating assets	$250,000	$250,000	$300,000	$375,000
Stockholders’ equity	$212,500	$212,500	$255,000	$318,750
Residual income (loss)	($7,500)	?	?	?
Margin	?	?	?	?
Turnover	?	?	?	?
ROI	?	?	?	?
RI	?	?	?	?

Tom Margin is

Tom Turnover is

James Margin is 5%

James Turnover is

Laura Margin is

Laura Residual Income is

Ralph Margin is

Ralph Turnover is

Answer 1

TOM

Tom Margin = [Net Operating Income / Revenue] x 100

= [$30,000 / 60,000] x 100

= 5%

Tom Turnover = Revenue / Average Operating Assets

= $600,000 / 250,000

= 2.4 Times

Tom ROI = Margin x Turnover

= 5% x 2.4

= 12%

JAMES

James Margin = [Net Operating Income / Revenue] x 100

= [$40,000 800,000] x 100

= 5%

James Turnover = Revenue / Average Operating Assets

= $800,000 / 240,000

= 3.2 Times

James ROI = Margin x Turnover

= 5% x 3.2

= 16%

LAURA

Laura Margin = [Net Operating Income / Revenue] x 100

= [$45,000 / 900,000] x 100

= 5%

Laura Turnover = Revenue / Average Operating Assets

= $900,000 / 300,000

= 3 Times

Laura ROI = Margin x Turnover

= 5% x 3

= 15%

Ralph

Ralph Margin = [Net Operating Income / Revenue] x 100

= [$75,000 / 750,000] x 100

= 10%

Ralph Turnover = Revenue / Average Operating Assets

= $750,000 / 355,000

= 2 Times

Ralph ROI = Margin x Turnover

= 10% x 2

= 20%