Data Table 1 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 Operating Income Total Assets $3,960,000 $ $1,320,000 Paint Stores 574,200 1,200,000 $ Consumer 180,000 1,600,000 Print Done national paint manufacturer and retailer Chicago Paints is Click the icon to view additional information.) Assume that management has specified a 21% target rate of return. Read the requirements. 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%.) 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, X.XX%.) Sales margin Paint Stores o% Consumer % Interpret your results. The Division more profitable on each dollar of sales. Woqaeet S, Canculane caumuvsiomo Capitar taOVer. cipret yourIcsults. First enter the formula, then calculate the capital turnover for each division. (Round to two decimal places.) Capital turnover times Paint Stores Consumer times - The Division is more efficient in generatingg sales with its assets. 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 a percentage, X.XX%.) ROI = % Paint Stores X Consumer % % x The Consumer Division's profitability on each dollar sales is than the Paint Stores Division's profitability. However, the Paint Store Division's efficiency is significantly than the Consumer Division's the Consumer Division's ROI. efficiency. These results cause the Paint Stores Division's ROI to be Requirement 5. Calculate each division's RI. Interpret your results and offer recommendations 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 -( = Interpret your results and offer recommendations for any division with negative RI. should work meeting management's target rate of return. The improving its .Improving this may help the division achieve positive residual income. 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 d cone of those choices. pr asset balance since the income used in the ROl calculation is eamed over the year. Most companies use the Management must also decide whether they wish to use the gross book value of assets or the net book value assets. baok value The often used because it is easily pulled from the balance sheet. However, ROI using that value will artificially rise over time due to Requirement 7. Describe some of the factors that management considers when setting its minimum target rate of return Requirement 8. Explain why some firms prefer to use RI rather than ROI for performance measurement. I 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
