Return on Investment
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Solution Summary
Comparative data on three companies in the same service industry are given in the table below. Study the table and respond to the questions that follow.
Company
A B C
Sales $600,000 $500,000 $ ?
Net operating income $ 84,000 $ 70,000 $ ?
Average operating assets $ 300,000 $ ? $1,000,000
Margin ? ? 3.5%
Turnover ? ? 2
ROI ? 7% ?
? What advantages are there to breaking down the ROI computation into two separate elements: margin and turnover?
? Fill in the missing information in the table, and comment on the relative performance of the three companies in as much detail as the data permit. Make specific recommendations about how to improve the ROI.
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