Hope and Co. is a multi-divisional marketing firm. The performance of divisions is evaluated using financial metrics such as ROI, Residual Income and EVA. For the year ended June 30, 2020, Hope's CEO received the following information about the performance of the sports marketing division: Sales Revenues $950,000 Operating Income $275,000 Total Assets $1,750,000 Current Liabilities $325,000 Debt (interest rate: 4%) $450,000 Common equity (book value) $550,000 For divisional performance evaluation Hope defined investment as total assets and income as operating income i.e. income before interest and taxes. Hope pays a flat rate of 20% in taxes on income. (a) What was the Sports Marketing division's ROI for the year? (2 decimal places)
Hope and Co. is a multi-divisional marketing firm. The performance of divisions is evaluated using financial metrics such as ROI, Residual Income and EVA. For the year ended June 30, 2020, Hope's CEO received the following information about the performance of the sports marketing division: Sales Revenues $950,000 Operating Income $275,000 Total Assets $1,750,000 Current Liabilities $325,000 Debt (interest rate: 4%) $450,000 Common equity (book value) $550,000 For divisional performance evaluation Hope defined investment as total assets and income as operating income i.e. income before interest and taxes. Hope pays a flat rate of 20% in taxes on income. (a) What was the Sports Marketing division's ROI for the year? (2 decimal places)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter14: Decentralized Operations
Section: Chapter Questions
Problem 14.5.2P
Related questions
Question
Q1
Hope and Co. is a multi-divisional marketing firm. The performance of divisions is evaluated using financial metrics such as
|
Sales Revenues |
$950,000 |
|
Operating Income |
$275,000 |
|
Total Assets |
$1,750,000 |
|
Current Liabilities |
$325,000 |
|
Debt (interest rate: 4%) |
$450,000 |
|
Common equity (book value) |
$550,000 |
For divisional performance evaluation Hope defined investment as total assets and income as operating income i.e. income before interest and taxes. Hope pays a flat rate of 20% in taxes on income.
(a) What was the Sports Marketing division's ROI for the year? (2 decimal places)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning