Question
Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama
Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Division Osaka Yokohama
Sales $ 10,400,000 $ 34,000,000
Net operating income $ 520,000 $ 2,380,000
Average operating assets $ 2,600,000 $ 17,000,000
1) For each division, compute the return on investment (ROI) in terms of margin and turnover. Osaka Yokohama
RO1 ?% ?%
2) Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 12%. Compute the residual income for each division:
Osaka Yokohama
Average operating assets ? ?
net opearting income ? ?
minimum required return on average assets ? ?
residual income ? ?
3)Is Yokohamas greater amount of residual income an indication that it is better managed?
Y or N ?
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