# Ratio calculation

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 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 ...

#### Solution Summary

The solution explains how to calculate margin ratio, turnover ratio, ROI, Residual income and EVA