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Components of ROI; improving ROI; residual income: retailer Zap is a retailer that specialises in electrical goods. It is a division of a large retail
Components of ROI; improving ROI; residual income: retailer Zap is a retailer that specialises in electrical goods. It is a division of a large retail company. The following data relate to the most recent year of operations: Profit $ 6 000 000 Sales revenue 75 000 000 Average invested capital 30 000 000 Required: 1. Calculate Zap's return on sales, investment turnover and return on investment. 2. Use the two component ratios to demonstrate two ways in which the manager of Zap could improve ROI, increasing it to 25 per cent. 3. Assume that the retail company has a minimum required rate of return of 11 per cent. Calculate the residual income for Zap
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