Extreme Sports Company makessnowboards, downhillskis, cross-countryskis, skateboards,surfboards, and inline skates. The company has found it beneficial to split operations into two divisions based on the climate required for thesport: Snow Sports andNon-snow Sports.

The following divisional information is available for the pastyear:

Snow Sports

Net Sales Revenue 5,700,000

Operating Income 969,000

Average Total Assets 4,700,000

Basic ROI 20.6%

Profit Margin Ratio 17%

Non-snow Sports

Net Sales Revenue 8,600,000

Operating Income 1,462,000

Average Total Assets 6,700,000

Basic ROI 21.8%

Profit Margin ROI 17%

Extreme's management has specified a 14% target rate of return.

Requirements

1. Compute eachdivision's asset turnover ratio(round to two decimalplaces). Interpret your results.

Begin by selecting the formula to calculate the assetturnover, and then enter the amounts to calculate eachdivision's asset turnover.

2. Use your answers to Requirement1, along with the profit marginratio, to recalculate ROI using the expanded formula. Do the answers agree with the basicROI?