Mastery Problem Return on Investment, margin, and turnoverReturn .docx

Mastery Problem: Return on Investment, margin, and
turnover
Return on Investment (ROI)
The manager of an investment center should be evaluated
based on revenues, costs, and investments. An evaluation
based on net income ignores the amount of investment the
investment center required. One way to measure operating
profit in relation to investment is a calculation called the
return on investment.
ROI is effective because it takes into consideration the three
factors under the control of an investment center manager:
revenues, costs, and investments. ROI measures the income
(or return) earned on each dollar of investment.
APPLY THE CONCEPTS: Calculating return on investment
The divisional income statements for three divisions of the
Duvall Company are shown.
Additional financial data from the three divisions of the
Duvall Company are shown.
Calculate the return on investment for each division. If
required, round the ROI to the nearest hundredth of a percent
(for example, 16.943% would be rounded to 16.94%).