Question

Requirement 3. Calculate each division's capital turnover. Interpret your results First enter the formula, then calculate each division's capital turnover. (Round your answer to two decimal places.) (11)(12)Capital turnover - Capital Residential times Professional times Interpret your results The Professional Division is generating about (13) about (14) Requirement 4. Use the expanded ROl formula to confirm your results from Requirement 1. What can you conclude? First enter the expanded formula, then calculate each division's ROl using the expanded formula of sales for every dollar of assets. The Residential Division is generating of sales for each dollar of assets invested. The (15) is more efficient. (16) (17) ROI Residential Professional Confirm your results from Requirement 1. Does your answer for the residential ROl agree with the basic ROl? (18) Does your answer for the professional ROl agree with the basic ROI? (19) What can you conclude? Even though the (20) (22) efficiency (as measured by the capital turnover) is higher than that of the (21) the profitability (as measured by the sales margin) is so much higher that it causes its ROl to be much higher than the Even though the (20) (22)profitability (as measured by the sales margin) is so much higher that it causes its ROl to be much higher than the (23) Requirement 5. Calculate each division's residual income (RI). Interpret your results. First enter the formula, then calculate each divisions RI. efficiency (as measured by the capital turnover) is higher than that of the (21) the (24) (25) (26) RI Res. Prof Interpret your results. (27) exceeding management's expectations 1: Data Table Sales Operating Incomeotal Assets $635,500 $1,031,250 Residential 63,550 $ 205,000 Professional 165,000 $375,000 Assume that management has a 25% target rate of return for each division. 2: Requirements 1. Calculate each division's ROI. 2. Calculate each division's sales margin. Interpret your results. 3. Calculate each division's capital turnover. Interpret your results. 4. Use the expanded ROl formula to confirm your results from Requirement 1. What can you conclude? 5. Calculate each division's residual income (RI). Interpret your results.

Answer 1

		Operating	Total
	Sales	Income	Assets
Residential	$635,500	$63,550	$205,000
Professional	1,031,250	165,000	375,000
ans 1
	Operating Income	/	Total Assets	=ROI
Residential	63550		205000	31	%
Professional	165000		375000	44	%
Each division ROI is higher than target rate of return however Professional ROI has an even higher ROI than Residential
ans 2	Operating Income	/	Sales	=sales margin
Residential	63550	/	635500	10	%
Professional	165000		1031250	16	%
Professional sales margin is higher than Residential
ans 3
	Sales	/	total assets	=Capital Turnover
Residential	635500	/	205000	3.1
Professional	1031250		375000	2.75
13) 2.75 times
14) 3.1 times
15) Residential is more efficient
ans 4
	Operating Income/Sales	X	Sales/Total assets	ROI
Residential	10	%	3.1	31	%
Professional	16	%	2.75	44	%
18) Yes
19) Yes
20) Residential
21) Professional
22) Professional profitability
23) Residential
ans 5
	Operating Income	-	(total assets*	Target rate of return)		Residual income
Residential	63550	-	205000	25%		12300
Professional	165000	-	375000	25%		71250
Professional exceeding managemnet expection
If any doubt please comment. As interpretation options were not provided I have filled all with my understanding