Return on investment is often expressed as follows:

Instructions
(a) Explain the advantages of breaking down the ROI calculation into two separate components.
(b) 1. Comparative data on three companies operating in the same industry follow. The minimum required ROI is 10% for all three companies. Determine the missing amounts.

2. Compare and contrast the performance of the three companies, with reference to their relative performance as measured by the ROI and residual income.

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Controllable margin Average operating asset Controllable margin Sales ROT F SalesAverage operating assets Company C Company A $1,000,000 $ 100,000 $ 500,000 Company B $500,000 $ 50,000 Sales Net operating income Average operating assets Profit margin Asset turnover Return on investment Residual income $5,000,000 05% 1%