Thanks

Options for requirement 1,2,3

Operating income

Sales

Total assets

Total current liabilities

Consumer/ Paint stores

4,5

Effective tax rate

Sales margin

WACC

Capital turnover

Operating income

Sales

Total assets

Total current liabilities

Both divisions are

Neither division is

Only the Consumer Division is

Only the Paint Stores Division is

Consumer Division/ Paint store Division

capital tumover rate

customer service

ROI

ssles

total assets

7

After-tax operating income

Assets less current liabilities amount

Competitors rate of return

General economic conditions

Interest rates on the company debt

Investors expectations

Minimum rate of return required by investors

Risk level of the division's business

Return being earned by other divisions

Splash Paints is a national paint manufacturer and retailer. E! (Click the icon to view additional information.) Assume that management has specified a 20% target rate of return. Read the requirements. Requirement 1. Calculate each division's ROI. First enter the formula, then calculate the ROI for each division. (Enter the ROI as a percent rounded to the nearest hunde ROI Paint Stores % Consumer % Requirement 2. Calculate each division's sales margin. Interpret your results. Enter the formula, then calculate the sales margin for each division. (Enter the sales margin as a percent rounded to the Sales margin Paint Stores % Consumer Interpret your results. The Division is more profitable on each dollar of sales. 1 X Requirements Data table The company is segmented into five division Paint Store (branded rotal location, Consumer (paint sold through stores such as Sears, Home Depot, and Lowe'). Automotive (sales to wo manufacturers), International and Administration. The following is selected hypothetical divisional information for the company's two largest divisions: Pain Stores and Consumer in thousands of dollars) Round all coloutations to two decimal places 1. Calculate each division's ROI 2. Calculate each division's sales margin. Interpret your results 3. Calculate each division's capital tumover. Interpret your results 4. Use the expanded ROI formula to confirm your results from Requirement 1. Interpret your results 5. Calculate each division's Ri. Interpret your results and offer recommendations for any division with negative RI 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. 7. Describe some of the factors that management considers when setting its minimum target rate of retum 8. Explain why some firms prefer to use Rl rather than ROI for performance measurement .. Explain why budget versus actual performance reports are insufficient for evaluating the performance of investment centers. Paint Stores Consumer Sales Operating Income Total Assets $ 3.960,000 674 200 $ 1,320,000 5 1.260,000 $ 195,300 $1,750,000 Print Done Requirement 3. Calculate each division's capital turnover. Interpret your results First enter the formula, then calculate the capital turnover for each division (Round to two decimal places) Paint Stores Capital turnover times Consumer times The Division is more efficient in generating sales with its assets Requirement 4. Use the expanded ROI formula to confirm your results from Requirement 1. Interpret your results. First enter the expanded ROI formula, then calculate the ROI for each division (Enter the Rol as a percent rounded to the nearest hundredth of a percentage, xxx%) ROI Paint Stores % % Consumer % than The Consumer Division's profitability on each dollar of sales is than the Paint Stores Division's profitability. However, the Paint Store Division's efficiency is significantly the Consumer Division's efficiency. These results cause the Paint Stores Division's ROI to be the Consumer Division's ROL Requirement 5. Calculate each division's RI. Interpret your results and offer recommendations for any division with negative RI 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 signs for negative residual incomes.) :) RI Paint Store Consumer %) %) Interpret your results and offer recommendations for any division with negative RI. V meeting management's target rate of return. The should work on improving its Improving this may help tho 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 Wasset balance since the income used in the ROI calculation is eamed over the year Management must also decide whether they wish to use the gross book value of assets or the nel book value of assets. The book value is often used because it is easily pulled from the balance sheet. However, Roling that value will artificialyse over time due to Requirement 7. Describe some of the factors that management considers when setting its minimum target rate of return VET, RUI Ung that value wil 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 Rl rather than ROI for performance measurement Ridoes 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