AdrenalineAdrenaline

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:

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Compute each division's residual income. Interpret your results. Are your results consistent with each division's ROI?

First enter the formula, then calculate each divisions residual income.

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Residual income

Sales Operating Income Total Assets Current Liabilities ROI Snow Sports $5,500,000 $1,045,000 $4,900,000 $440,000 21.3% Non-Snow Sports $8,600,000 $1,634,000 $6,800,000 $665,000 24.0% AdrenalineAdrenaline's management has specified a target 16% rate of return.