Corside the towing condensed financial stress of Safe Money, re. The company's turpat rate of isso the con la view the complet Requirement 1. Co the company's ROL Round all you were to decimal Begin by electing the formula to calculate return on investimentos, and then enter the worst case the company's Rol Round your word to find and enter your to the nearest hundehol a pront, X Duta Pequirements Sale Money, Inc. Comparatie Balance Sheet As of December 21,2018 2017 2018 For Y Ended December 31, 2016 NetSaver Cost of God 1. Calculate the company's ROL Round all of your own to four decina 2. Calone company's profit marginate interpret your 3. Cwthe corriere you 4. Uw the expanded ROI formula to confirm your result from Requirement1 Print Done Interesse wore Before income Tax Expres (18.000 22.000 $70.000.000 Accounts Receive 4.200 Property Plantandert 310,000 214.000 147 000 113.000 To $ 57,000 5413,000 Labies and Stockholders' Equity 5 25. 149.000 41 190,000 Carmon Stone 214.000 2:12.000 18.000 70 # $8.000 $ 413.000 Done 10 CA Check ROI. heet Requirement 1. Calculate the company's ROI. Round all of your answers to four decimal places. Return on investment (ROI) is one of the most commonly used KPIs for evaluating an investment center's financial performance. Rol is a measure of profitability and efficiency. It measures the amount of operating income an investment center earns relative to the amount of its average total assets. Calculate the average total assets using the information provided in the comparative balance sheet and complete the table below to calculate the company's ROI. (Round your final answer to the nearest hundredth of a percent, X.XX%) Operating income Average total assets ROI 300,000 500,000 60% profit ind 2017 assel Ormul 2018 RI. In 700 Y RO heet nd 2017 Requirement 2. Calculate the company's profit margin ratio. Interpret your results. The profit margin ratio shows how much operating income the division earns on every $1.00 of sales, so this term focuses on profitability Management often isolates the profit margin ratio to determine if profit is driving ROI. The profit margin ratio is calculated by dividing operating income by net sales revenue. Operating income Net sales revenue Profit margin ratio Now use the table below to calculate the company's profit margin ratio. (Round your final answer to the nearest hundredth of a percent, X.XX%) Operating income Net sales revenue Profit margin ratio 300,000 10,000,000 I Money Safe, Inc. is earning $ 0.03-3% * $1.00) of operating income on each dollar of sales. pri as 2018 om RI S 70,9 $ $ 55.2 48 Requirement 3. Calculate the company's asset turnover ratio. Interpret your results The asset turnover ratio shows how efficiently a company uses its average total assets to generate sales. Rather than focusing on profitability, asset turnover focuses on efficiency. Management often isolates the asset turnover to determine if that is what is driving the company's different ROI's. The asset turnover ratio is calculated by dividing net sales revenue by average total assets. Net sales revenue Average total assets Asset turnover ratio Now calculate the asset turnover ratio. Net sales revenue Average total assets Asset turnover ratio $ 10,000,000 500,000 20 RC 117 pro as: 18 om RI 70,0 The company's asset turnover ratio explains how efficiently a company uses its average total assets to generate sales. The company is generating $ 20 (+20 x $1.00) of sales with every dollar r average total assets. 55.2 R Requirement 4. Use the expanded ROI formula to confirm your results from Requirement 1. Interpret your results. Return on investment (ROI) measures the amount of operating income an investment center earns relative to the amount of its assets. To determine what is driving a division's ROI, management often restates the ROI equation in its expanded form: Operating income Net sales revenue ROI Net sales revenue Average total assets Notice that Net sales revenue is incorporated in the denominator of the first term, and in the numerator of the second term. When the two terms are multiplied together, Net sales revenue cancels out, leaving the original ROI formula. The first term in the equation is the profit margin ratio, and the second term is the asset turnover ratio. Let's use the amounts you calculated above and enter them in the expanded formula to calculate the ROI. The ROI calculated using the expanded formula should be the same as the ROI calculated in Requirement 1, although sometimes there are slight rounding differences Using the expanded formula, calculate the ROI for the company. Profit Margin Asset Turnover ROI 3 % 20 60 % Review your answer with the basic Rol you calculated in Requirement 1. Do they agree? 2017 a: 2018 or R 70,9 1 55,2 4,8 Requirement 5. Calculate the company's RI. Interpret your results. Residual income (RI) is commonly used for evaluating an investment center's financial performance. Rl measures the company's profitability and the efficiency with which the division uses its average total assets. RI also incorporates another piece of information: top management's target rate of return. The target rate of return is the minimum acceptable rate of return that top management expects a company to earn with its average total assets. Rl is calculated with the following formula Operating income ( Average total assets Target rate of return ) = RI Now calculate the RI for Money Safe, Inc. (Enter the target rate as a percentage.) Operating income - (Average total assets X Targe rate of return RI 300,000 - ($ 500,000 20 %) = $ 200,000 A positive RI means that the company is meeting or exceeding management's target rate of return. A negative RI means that the company is not meeting management's target rate of return. Review your calculation of Rl above to determine whether Money Safo, Inc. is meeting or falling short of management's expectations. $