Requirement 5. Calculate each division's RI. Interpret your results and offer recommendations for any division with negative RI. First enter the formula, then calculate the RI for each division. (Enter the amount in thousands. Use parentheses or a minus sign for negative residual incomes.) )- x = RI Paint Stores -( x Consumer x %) % ) = Interpret your results and offer recommendations for any division with negative RI. meeting management's target rate of return. The should work on improving its Improving this may help the division achieve positive residual income. Requirement 6. Total asset data were provided in this problem. If you were to gather this information from an annual report, how would you measure total assets? Describe your measurement choices and some of the pros and cons of those choices. Most companies use the asset balance since the income used in the ROI calculation is earned over the year. Management must also decide whether they wish to use the gross book value of assets or the net book value of assets. The book value is often used because it is easily pulled from the balance sheet. However, ROI using that value will artificially rise over time due to Requirement 7. Describe some of the factors that management considers when setting its minimum target rate of return. Requirement 8. Explain why some firms prefer to use RI rather than ROI for performance measurement. RI does a better job of Requirement 9. Explain why budget versus actual performance reports are insufficient for evaluating the performance of investment centers. Investment centers are responsible for Budget versus actual performance reports are insufficient because they do not measure Sherwin-Williams is a national paint manufacturer and retailer. (Click the icon to view additional information.) Assume that management has specified a 19% target rate of return. Read the requirements. Data table The company is segmented into five divisions: Paint Stores (branded retail location), Consumer (paint sold through stores such as Sears, Home Depot, and Lowe's), Automotive (sales to auto manufacturers), International, and Administration. The following is selected hypothetical divisional information for the company's two largest divisions: Paint Stores and Consumer (in thousands of dollars). Sales Operating Income Total Assets Paint Stores $ 3,920,000 $ 490,000 $ 1,400,000 ... Consumer..... $ 1,140,000 $ 148,200 $ 1,425,000