• The following are selected data for the division for the consumer products of ABC Corp for 2019:

Sales

50,000,000

Average invested capital (assets)

20,000,000

Net income

2,000,000

Cost of capital

8%

What is the return on sales for the division?

1. 4%
2. 8%
3. 10%
4. 20%

• The following are selected data for the division for the consumer products of ABC Corp for 2019:

Sales

50,000,000

Average invested capital (assets)

20,000,000

Net income

2,000,000

Cost of capital

8%

What is the asset turn-over ratio for the division?

1. .25
2. 2.5
3. 8
4. 10%

• The following are selected data for the division for the consumer products of ABC Corp for 2019:

Sales

50,000,000

Average invested capital (assets)

20,000,000

Net income

2,000,000

Cost of capital

8%

What is the return on investment for the division?

1. 2%
2. 4%
3. 8%
4. 10%

• The following are selected data for the division for the consumer products of ABC Corp for 2019:

Sales

50,000,000

Average invested capital (assets)

20,000,000

Net income

2,000,000

Cost of capital

8%

What is the amount of residual income for the division?

1. P 400,000
2. P 1,000,000
3. P 1,600,000
4. P 2,000,000

• The following are selected data for the division for the consumer products of ABC Corp for 2019:

Sales

50,000,000

Average invested capital (assets)

20,000,000

Net income

2,000,000

Cost of capital

8%

What is the interest rate spread for the division? (Hint: the spread is equal to the ROI less the cost of capital.)

1. 2%
2. 8%
3. 10%
4. 20%

• The following is available for Golden Corporation for 2019:

Sales

2,000,000

Average invested capital (assets)

500,000

Net income

300,000

Cost of capital

18%

What is the return on investment for Golden Corp.?

1. 15%
2. 18%
3. 33%
4. 60%

• The following is available for Golden Corporation for 2019:

Sales

2,000,000

Average invested capital (assets)

500,000

Net income

300,000

Cost of capital

18%

What is the return on investment for Golden Corp.?

1. 15%
2. 18%
3. 33%
4. 60%

• The following is available for Golden Corporation for 2019:

Sales

2,000,000

Average invested capital (assets)

500,000

Net income

300,000

Cost of capital

18%

What is the residual income for Golden Corp.?

1. P - 0 -
2. P 200,000
3. P 210,000
4. P 246,000

8.A company's rate of return on investment (ROI) is equal to the

1. Percentage of profit on sales, divided by the average invested capital turn-over rate
2. Percentage of profit on sales, multiplied by the average invested capital turnover rate
3. Average invested capital, divided by average invested capital turn-over rate
4. Average invested capital, multiplied by average invested capital turn-over rate

9.Return on investment can be increased by

1. Increasing operating assets or invested capital
2. Decreasing operating assets or invested capital
3. Decreasing revenues
4. Both (b) and (c)

10.The residual income (RI) is often preferred over return on investment (ROI) as a performance evaluation because

1. Residual income is a measure over time while return on investment represents the results for a single time period.
2. Residual income concentrates on maximizing absolute amount of income rather than a percentage return as with return of investment.
3. The imputed interest rate used in calculating residual income is more easily derived than the target rate that is compared to the calculated ROI.
4. Average investment is employed with residual income while year-end investment is employed with ROI.