Question
Sunrise has two divisions: East and Midwest. Sunrise has a minimum required rate of return of 8%. In 2019, the East division has average operating
Sunrise has two divisions: East and Midwest. Sunrise has a minimum required rate of return of 8%. In 2019, the East division has average operating assets of 50 million, net operating income of $5 million, and sales of $100,000 million. In 2019, the Midwest division has average operating assets of 20 million, net operating income of $2.5 million, and sales of $25,000 million. Please (1) use both ROI and the residual income model to evaluate these two divisions managerial performance and provide comment on which manager performed better; (2) use margin and turnover ratios to compare two divisions operating strategies.
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