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 | $ | 740,000 |
| Net operating income | $ | 14,060 |
| Average operating assets | $ | 100,000 |
| Assume that the manager of the club is able to increase sales by $74,000 and that, as a result, net operating income increases by $5,476. Further assume that this is possible without any increase in operating assets. What would be the clubs return on investment (ROI)? Assume that the manager of the club is able to reduce expenses by $2,960 without any change in sales or operating assets. What would be the clubs return on investment (ROI)?
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