A company has computed that their "asset turnover" is 3. Which of the following statements is the best interpretation of these results?

		For every $3 of sales, $1 of net profit is generated.
		For every $3 invested in assets, $1 in net profit is generated.
		For every $1 invested in assets, $3 in sales are generated.
		For every $3 invested in assets, $1 in sales are generated

Bryan Manufacturing had sales of $4,000,000 and net operating income of $700,000. Operating assets during the year averaged $600,000. The manager of Hardcastle is considering the purchase of a new machine which is expected to increase average operating assets by 8%. If the new machine is purchased, the company's new return on investment (ROI) would be:

		126.0%
		16.2%
		108.0%
		92.6%

Residual income:

		is most useful as a way to compare individual divisions of different sizes.
		is the amount of income earned in excess of a predetermined minimum rate of return on assets.
		should not be used as a way to evaluate the manager of an investment center.
		is often called economic value added (EVA)

Duncan Ltd. has the following information available for one its divisions in the current year:

Duncan requires each of its divisions to generate a minimum return of 25%. What is this division's residual income?

		$200,000
		$1,450,000
		$1,700,000
		$5,500,000

Sales revenue Operating expenses Average operating assets $6,000,000 3,800,000 2.000.000