Ratio calculation
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Sprint Company has the following data for 2011:
Division A Division B
Sales $400,000 $300,000
Contribution margin 160,000 125,000
Operating income 80,000 30,000
Average operating assets 320,000 200,000
Weighted average cost of capital 15% 15%
Sprint Company has a target ROI of 20 percent.
Required:
Calculate the following amounts for each division:
Make sure you have answers for Division A & B. Also make sure your answers are in the appropriate format.
a. Margin ratio
b. Turnover ratio
c. ROI
d. Residual income
e. EVA
Must show work.
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Solution Summary
The solution explains how to calculate margin ratio, turnover ratio, ROI, Residual income and EVA
Solution Preview
a. Margin = Operating Income/Sales
Division A
Margin = 80,000/400,000 = 20%
Division B = 30,000/300,000 = 10%
b. Turnover Ratio = Sales/Average Operating Assets
Division ...
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