Canvas Paints is a national paint manufacturer and retailer. (Click the icon to view additional information.) Assume that management has specified a 21% target rate of return. Read the requirements. Requirement 1. Calculate each division's ROl. First enter the formula, then calculate the ROI for each division. (Enter the ROI as a percent rounded to the nearest hundredth of a percentage, X.XX%.) Requirement 2. Calculate each division's sales margin. Interpret your results. Enter the formula. then calculate the sales marain for each division. (Enter the sales marcin as a dercent rounded to the nearest hundrecth of a percentage, X.XX%.) Data table Interpret your results. The Division is more profitable on each dollar of sales. The company is segmented into five divisions: Paint Stores (branded retail location), Consumer (paint sold through stores such as Home Depot and Lowe's). Automotive (sales to auto manufacturers). International, and Administration. The following is selected hypothetical Requirement 3. Calculate each division's capital turnover. Interpret your results. divisional information for the company's two largest divisions: Paint Firat enter the formula, then calculate the capital tumaver for each division. (Round to two decimal places.) Stores and Consumer (in thousands of dollars). Canvas Paints is a national paint manulacturer and retailer. 'Click the icon to view additional information.) Assume that management has specifed a 21% target rate of return. Read the The Division is more efficient in generating sales with ita assets. Requirement 4. Use the expended ROI formula to confirm your resulta 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 hundrodth of a percentage, XX%.) The Consumer Division's profitability on each dollar of sales is than the Paint Stores Division's profitability. However, the Paint Store Division's efficiency is significantly then the Consumer Division's efficiency. These results cause the Paint Stores Diviaion's ROl to be the Consumer Division's ROI. Requirement 5. Calculaic cach division's RI. Interpet your ressults arnd oflicr recormmendations for any civision wilh negative RI. Fira: enter the formula, then calculate the RI for each clivision. (Enter the amount in thousands. Use parentheses or a minus sign for negative residual incomes.) Interpret your results and offer recommendations for any division with negative RI. meeting manegement's target rate of return. The should work on improving its Improving this may help the division achieve positive residual income. those choices. Most companies use the asset belance since the income used in the Rol 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 book value is often used because t is easily pulled from the balance sheet. However. Rol using that value will art ficially rise over time due to Requirement 7. Describe some of the factors that management considers when setting its minimum target rate of return. Requirement B. Explain why some fintis prefer to uae RI rather than Rol for perfonmance messurement. RI does a better job of [ Requirement 9. Explain why budget versus actual performance reports are insufficient for evaluating the performance of investment centers. Investment centers are responsible for Budget versus actual performance reports are insufficient because they do not measure
