Answered: Howard has an ROI of 26% based on…

Howard has an ROI of 26% based on revenues of $408,000. The investment turnover is 2. What is the residual income if the cost of capital is 15%? A.) (12,440) B.) 106,080 C.) 61,200 D.) 22,440

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 5EA: During the current year, Sokowski Manufacturing earned income of $350,000 from total sales of...

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

Howard has an ROI of 26% based on revenues of $408,000. The investment turnover is 2. What is the residual income if the cost of capital is 15%?
A.) (12,440)
B.) 106,080
C.) 61,200
D.) 22,440

Formula Formula ROI (%) = Net Income Principal Amount × 100

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