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Required information [The following information applies to the questions displayed below. Megamart, a retailer of consumer goods, provides the following information on two of its
Required information [The following information applies to the questions displayed below. Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). Investment Center Electronics Sporting goods Sales Income $45,000,000 $3,420,000 25,200,000 2,520,000 Average Invested Assets $18,000,000 14,000,000 Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? Return on Investment Choose Numerator: 7 Choose Denominator: Return on Investment 7 Return on Investment Electronics 1 Sporting Goods Which department is most efficient at using assets to generate returns for the company? Assume a target income level of 11% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company? Investment Center Electronics Sporting Goods Net income Target net income Residual income Which department is most efficient at using assets to generate returns for the company? Compute profit margin for each department. Which department generates the most net income per dollar of sales? Profit Margin 7 Choose Numerator: = Choose Denominator: Profit Margin Investment Center 7 Profit Margin = Electronics 1 Sporting Goods Which department generates the most net income per dollar of sales? Compute investment turnover for each department. Which department is most efficient at generating sales from average invested assets? Investment Turnover Investment Turnover Investment Turnover Choose Numerator: 1 Choose Denominator: Investment / Center Electronics / Sporting Goods Which department is most efficient at generating sales from average invested assets
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