1. eBook

   Print Item

   Return on Investment, Residual Income for a Service Company

   H&R Block Inc. provides tax preparation services throughout the United States and other parts of the world. These services are provided through two segments: company-owned offices and franchised operations.

   Recent financial information provided by H&R Block for its company-owned and franchised operations is as follows (in millions):

   		Company-Owned		Franchised Operations
   Revenues		$2,651		$ 335
   Income from operations		617		86
   Total assets		3,930		586

   a. Use the DuPont formula to determine the return on investment for each business divisions. Round whole percents to one decimal place and investment turnover to two decimal places.

   Division	Return on Investment
   Company-Owned	fill in the blank 1%
   Franchised Operations	fill in the blank 2%

   b. Determine the residual income for each division, assuming a minimum acceptable income of 15% of total assets. Round minimal acceptable return to the nearest million dollars.

   Division	Residual income
   Company-Owned	$fill in the blank 3millions
   Franchised Operations	$fill in the blank 4millions

   c. The Franchised Operations (FO) segment has the

   strongestlowestlowest

   return on investment, which is mainly the result of a

   strongerlowerlower

   investment turnover.