Question
Q1 Hope and Co. is a multi-divisional marketing firm. The performance of divisions is evaluated using financial metrics such as ROI, Residual Income and EVA.
Q1
Hope and Co. is a multi-divisional marketing firm. The performance of divisions is evaluated using financial metrics such as ROI, Residual Income and EVA. For the year ended June 30, 2020, Hope's CEO received the following information about the performance of the sports marketing division:
| Sales Revenues | $950,000 |
| Operating Income | $275,000 |
| Total Assets | $1,750,000 |
| Current Liabilities | $325,000 |
| Debt (interest rate: 4%) | $450,000 |
| Common equity (book value) | $550,000 |
For divisional performance evaluation Hope defined investment as total assets and income as operating income i.e. income before interest and taxes. Hope pays a flat rate of 20% in taxes on income.
(a) What was the Sports Marketing division's ROI for the year? (2 decimal places)
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Accounting Principles Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
9th Canadian Edition
978-1119786818, 1119786819
