Question
Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based
Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The company's Springfield Club reported the following results for the past year:
Sales$ 860,000Net operating income$ 26,660Average operating assets$ 100,000
The following questions are to be considered independently
1. Compute the Springfield clubs return on investment (ROI). (Do not round intermediate calculations. Round your answer to 2 decimal places.)
2. Assume that the manager of the club is able to increase sales by $86,000 and that, as a result, net operating income increases by $7,396. Further assume that this is possible without any increase in average operating assets. What would be the clubs return on investment (ROI)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
3. Assume that the manager of the club is able to reduce expenses by $3,440 without any change in sales or average operating assets. What would be the clubs return on investment (ROI)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
4. Assume that the manager of the club is able to reduce average operating assets by $50,000 without any change in sales or net operating income. What would be the clubs return on investment (ROI)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started