Zims, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: professional

Question:

Zims, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: professional and residential. The following divisional information was available for the past year:

Net Sales Revenue Operating Income Average Total Assets Residential $ 550,000 $ 65,280 $ 192,000 Professional 1,090,000 164,820 402,000

Management has a 26% target rate of return for each division.
Requirements
1. Calculate each division's ROI. Round all of your answers to four decimal places.
2. Calculate each division's profit margin ratio. Interpret your results.
3. Calculate each division's asset turnover ratio. Interpret your results.
4. Use the expanded ROI formula to confirm your results from Requirement 1. What can you conclude?

Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.