Required information [The following information applies to the questions displayed below.] 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 Net operating income Average operating assets $ 1,400,000 $ 70,000 $ 350,000 The following questions are to be considered independently. Required: 1. Compute the Springfield club's return on investment (ROI). Return on investment (ROI) % 2. Assume that the manager of the club is able to increase sales by $70,000 and that, as a result, net operating income increases by $18,200. Further assume that this is possible without any increase in average operating assets. What would be the club's return on investment (ROI)? (Round your answer to 1 decimal place.) Return on investment (ROI) % 3. Assume that the manager of the club is able to reduce expenses by $14,000 without any change in sales or average operating assets. What would be the club's return on investment (ROI)? Return on investment (ROI) % 4. Assume that the manager of the club is able to reduce average operating assets by $70,000 without any change in sales or net operating income. What would be the club's return on investment (ROI)? Return on investment (ROI) % Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A. Land (undeveloped) Total assets Liabilities and Stockholders' Equity Accounts payable Long-term debt Stockholders' equity Total liabilities and stockholders' equity 126,000 331,000 572,000 821,000 406,000 254,000 $ 2,510,000 $ 133,000 476,000 479,000 802,000 428,000 246,000 $ 2,564,000 $ 380,000 1,035,000 1,095,000 $ 2,510,000 $ 347,000 1,035,000 1,182,000 $ 2,564,000 Joel de Paris, Inc. Income Statement Sales Operating expenses Net operating income Interest and taxes: Interest expense $ 119,000 Tax expense 206,000 Net income $ 4,675,000 4,067,250 607,750 325,000 282,750 $ The company paid dividends of $195,750 last year. The Investment in Buisson, S.A., on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%. Required: 1. Compute the company's average operating assets for last year. 2. Compute the company's margin, turnover, and return on investment (ROI) for last year. (Round "Margin", "Turnover" and "ROI" to 2 decimal places.) 3. What was the company's residual income last year? Required: 1. Compute the company's average operating assets for last year. 2. Compute the company's margin, turnover, and return on investment (ROI) for last year. (Round "Margin", "Turnover" and "ROI" to 2 decimal places.) 3. What was the company's residual income last year? 1. Average operating assets Margin 2. % Turnover ROI % 3. Residual income
