Return on Investment

Uxbridge Company would like to examine the sales margin and asset components of return on investment for three of its divisions and has accordingly prepared the following information:

Division

Investment

Division Operating Income

Sales

A

$575,000

$75,000

$500,000

B

$700,000

$91,000

$542,000

C

$1,000,000

$176,000

$763,000

Required:

a)Compute each division's return on investment (ROI), sale margin, and turnover.

b)Comment on the divisions' relative rankings on the ratios computed in a).

c)Compute each divisions' residual income, assuming a required return on investment of 8%.