Bear Paints is a national paint manufacturer and retailer. EE (Click the icon to view additional information.) Requirements - X i Data Table - X The company is segmented into five divisions: Paint Stores (branded retail location). Consumer (paint sold through stores such as Sears, Home Depot, and Lowe's). Automotive (sales to auto manufacturers). International, and Administration. The following is selected hypothetical divisional information for the company's two largest divisions: Paint Stores and Consumer (in thousands of dollars) Sales Total Assets Round all calculations to two decimal places. 1. Calculate each division's ROL 2. Calculate each division's sales margin. Interpret your results 3. Calculate each division's capital turnover. Interpret your results 4. Use the expanded ROI formula to confirm your results from Requirement 1 Interpret your results. 5. Calculate each division's RI. Interpret your results and offer recommendations for any division with negative RI 6. Total asset data were provided in this problem. If you were to gather this information from an annual report, how would you measure total assets? Describe your measurement choices and some of the pros and cons of those choices 7. Describe some of the factors that management considers when setting its minimum target rate of return 8. Explain why some firms prefer to use Rl rather than ROI for performance measurement. 9. Explain why budget versus actual performance reports are insufficient for evaluating the performance of investment centers. Paint Stores Consumer Operating Income $ 3.800.000 $ 570,000 $ 1,100 000 $ 176.000 $ 1,900,000 $ 2,000,000 Print Done Requirement 1. Calculate each division's ROI. First enter the formula, then calculate the ROI for each division (Enter the ROI as a percent rounded to the nearest hu ROI Paint Stores % Consumer Requirement 2. Calculate each division's sales margin. Interpret your results. Enter the formula, then calculate the sales margin for each division (Enter the sales margin as a percent rounded to the nearest hundredth of a percentage, XX Sales margin Paint Stores % Consumer % Interpret your results. The Division is more profitable on each dollar of sales. Reqy Consumer each division's capital turnover. Interpret your results. n calculate the capital turnover for each division (Round to two decimal places.) First Paint Stores Capital turnover times Requirement 3. Calculate each division's capital tumover. Interpret your results First enter the formula, then calculate the capital turnover for each division (Round to two decimal places) Capital turnover Paint Stores times Consumer times The Division is more efficient in generating sales with its assets. Regi Consumer xpanded ROI formula to confirm your results from Requirement 1. Interpret your results. Ol formula then calculate the ROI for each division (Enter the ROI as a percent rounded to the nearest hundredth of a First Paint Stores ROL Requirement 4. Use the expanded ROI formula to confirm your results from Requirement 1. Interpret your results. First enter the expanded ROI formula, then calculate the ROI for each division (Enter the ROI as a percent rounded to the nearest hundredth of ROI Paint Stores % Consumer % X % Requirement 5. Calculate each division's RI. Interpret your results and offer recommendations for any division with negative RI. First enter the formula, then calculate the RI for each division (Enter the amount in thousands. Use parentheses or a minus sign for negative residual incomes.) -( ) RI - Paint Stores Consumer X %) = x % ) Interpret your results and offer recommendations for any division with negative RI. meeting management's target rate return. The should work on improving its Improving this may help the division achieve po vided in this problem. If you were to gather this information from an annual report, how would you measure total assets? Describe your measurement choices and so it balance since the income used in the ROI calculation is earned over the year. Both divisions are Neither division is Only the Consumer Division is Only the Paint Stores Division is ey wish to use the gross book value of assets or the net book value of assets. ause it is easily pulled from the balance sheet. However, Rol using that value will artificially rise over time due to Requirement 6. Total asset data were provided in this problem. If you were to gather this information from an annual report, how would you measure total assets? Describe your measurement choices and some of the pros and cons of those choices. Most companies use the asset balance since the income used in the ROI calculation is earned over the year Management must also decide whether they wish to use the gross book value of assets or the net book value of assets The 7 book value is often used because it is easily pulled from the balance sheet However, Rol using that value will artificially rise over time due to numaribo com of the factor that mananement considers when settinnits minimum tarnat rate of return ROF using that value will artificially nse over ume Requirement 7. Describe some of the factors that management considers when setting its minimum target rate of return After-tax operating income Interest rates on the company debt Assets less current liabilities amount Competitors rate of return General economic conditions Investors expectations Pouirement 8 Fynlain why some firms prefer to use Rl rather than ROI for performance measurement Requirement 8. Explain why some firms prefer to use Rl rather than ROI for performance measurement Rl does a better job of focusing on stockholders and creditors rate of return Requirement 9. Explain why budget versus actual performance reports are insufficient for evaluating the performance of investment centers Investment centers are responsible for both generating profit and efficiently managing a divison's assets. Budget versus actual performance reports are insufficient because they do not measure how efficiently the division uses its assets the innuit fields and then continue to the next