1. Outdoor Sports Company makes snowboards, downhill skis, cross-country skis, skateboards, surfboards, and in-line skates. The company has found it beneficial to split operations into two divisions based on the climate required for the sport: Snow Sports and Non-Snow Sports. The following divisional information is available for the past year: (Click the icon to view the divisional information.) 1. Calculate each division's ROI. 2. Top management has extra funds to invest. Which division will most likely receive those funds? Why? 3. Can you explain why one division's ROI is higher? How could management gain more insight? 1. Calculate each division's ROI. Enter the formula, and then calculate each division's ROI. (Enter the ROI as a percent rounded to one decimal place, X.X%.) Operating income Total assets ROI $ 1,053,500 / $ 4,900,000 21.5 % Snow Sports Non-Snow Sports % 2. Top management has extra funds to invest. Which division will most likely receive those funds? Why? The (1) will most likely receive those funds because it has (2). 3. Can you explain why one division's ROI is higher? (3) How could management gain more insight? (4) 1: Divisional information Operating Total Current Liabilities Sales Income Assets $ 5,600,000 $ 1,053,500 $ 4,900,000 $ Snow Sports Non-Snow Sports 460,000 710,000 8,600,000 897,000 3,900,000 Outdoor Sports management has specified a target 13% rate of return. The company's weighted average cost of capital (WACC) is 12%, and its effective tax rate is 35% (1) O non-snow sports division O snow sports division O greater total assets. O lower liabilities. (2) O a higher ROI. O a lower ROI. O greater operating income. O greater sales. (3) O Non-snow sports division has greater operating income Non-snow sports division has greater sales O Snow sports division has fewer liabilities There is not enough information to explain why one ROI is greater. O Use the expanded ROI formula. (4) O Calculate the current ratio. O Interview customers. O Interview employees. O Look at individual asset accounts. YOU ANSWERED: Snow Sports 940000 4000000 23.5 %