   Chapter 24, Problem 24.10EX

Chapter
Section
Textbook Problem

Return on investment The income from operations and the amount of invested assets in each division of Beck Industries are as follows:   Income from Operations Invested Assets Retail Division $5,400,000$30,000,000 Commercial Division 6,250,000 25,000,000 Internet Division 1,800,000 12,000,000  a. Compute the return on investment for each division. b. Which division is the most profitable per dollar invested?

(a)

To determine

Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in earning income from operations. So, ROI is a tool used to measure and compare the performance of a units or divisions or a companies.

Formula of ROI:

Return on investment=Income from operationsInvested assets

To determine: The ROI for each division

Explanation

Determine ROI of R Division, if income from operations is $5,400,000, and invested assets are$30,000,000.

Return on investment=Income from operationsInvested assets=$5,400,000$30,000,000= 0.18 or 18%

Determine ROI of C Division, if income from operations is $6,250,000, and invested assets are$25,000,000

(b)

To determine
The profitable division

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