Analysis of Return on Capital; Comparison of Three Companies (Adapted from N.A.A. Research Report No. 35, pp. 34-35)

1. Rate of return on capital is often expressed as follows:

What advantages can you see in the breakdown of the computation into two separate components?
2. Fill in the blanks:
COMPANIES IN SAME INDUSTRY A B Cc Sales $1,000,000 $500,000 $ —
Income 100,000 50,000 —
Capital 500,000 _ 5,000,000 Income as a percent of sales — — 0.5%
Turnover of capital - _ 2 Return on investment _ 1% — lop1