EXERCISE 2 Return on Investment (ROI): Measures the level of operating income generating on the company's invested assets. Even though the current year's Responsibility Report indicates some unfavorable variances (previous pag). The backpack division at Peak Outdoors historically has delivered a positive Return on Investment (ROI) for Peak's overall operations. Calculate the current year's ROI for the backpack division using the following information: $925,000 $210,000 $600,000 Sales Operating Income Operating Assets Using the expanded ROI formula: ROI Operating Income X Sales Operating Assets Sales % ROI X The first calculation (Operating Income / Sales) represents the operating margin for the business and shows that total ROI can be increased by reducing expenses thereby increasing Operating Income. The second calculation (Sales/Operating Assets) is a turnover ratio which measures how efficiently Peak is using its operating assets in generating Sales. For instance, ROI would increase if Peak could produce the same (or better) sales while utilizing less assets to generate those sales. The ROI formula can also be simplified as follows: ROI Operating Income Operating Assets