Q1.

A firm has four divisions. The target return for the company is 25%. Here are the details for each division.

Sales Operating Income Total Assets Current Liabilities

Division A $4,00,000 $1,00,000 $3,00,000 $70,000

Division B $10,00,000 $2,50,000 $8,00,000 $1,50,000

Division C $8,00,000 $3,00,000 $12,00,000 $2,00,000

Division D $15,00,000 $5,00,000 $25,00,000 $4,00,000

1. Calculate each divisions return on investment, profit margin, asset turnover, and residual income.

2. Interpret the results and conclude on which divisions are performing the best.

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