3 Rogers, a national manufacturer of lawn mowing and snow-blowing equipment, segments its business according to customer type: Professional and Residential. Assume 4 divisional information was available for the past year (in thousands of dollars): 5 6 7 Residential 8 Professional 9 SS Sales Operating Income Total Assets 850,000 $ 1,095,000 $ 68,000 $ 153,300 $ 200,000 365,000 0 Requirement 1. Calculate each division's ROI. 1 First enter the formula, then calculate each division's ROI. 2 3 4 Residential 15 Professional 16 ROI B Requirement 2. Calculate each division's sales margin. First enter the formula, then calculate each division's sales margin. Residential Professional The Professional division is earning about Sales Margin cents on each dollar of sales whereas the Residential division is earning about cents on each dollar of sales. Higher sales margins help to account for higher ROIs. 1 Requirement 3. Calculate each division's capital turnover. First enter the formula, then calculate each division's capital turnover. 2 3 Residential 4 Professional + + + Capital Turnover times times S 86 The Professional division is generating about 87 38 dollars of sales for every dollar of assets. The Residential division is generating about dollars of sales for each dollar of assets invested. The Residential division is more efficient. 2 3 Requirement 4. Use the expanded ROI formula to confirm your results from Requirement 1. What can you conclude? First enter the formula, then calculate each division's ROI using the expanded formula. 4 Residential 5 Professional 5 X X X ROI 7 Even though the division's efficiency is higher than that of the the 8 division's profitabilty is so much higher that it causes its ROI to be much higher than the division. 9 0 Requirement 5. Calculate each division's residual income (RI). Interpret your results. 2 First enter the formula, then calculate each division's RI. B 4 5 6 69 ( ( ( 7 8 Both divisions are exceeding management's expectations. 59 50 X X X Residual Income