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Ch12_PPT__Additional_Examples_of_ROI

Ch12_PPT__Additional_Examples_of_ROI - Additional Examples...

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Click to edit Master subtitle style 7/7/11 Additional Examples of ROI FB2101 (2010/11 Sem B) Chapter 12
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7/7/11 Increasing Sales Without an Increase in Operating Assets Regale's manager was able to increase sales to $600,000, while operating expenses increased to $558,000. Regale's net operating income increased to $42,000. There was no change in the average operating Let’s calculate the new ROI.
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7/7/11 Increasing Sales Without an Increase in Operating Assets $42,000 $600,000 × $600,000 $200,000 ROI = 7% ° 3.0 = 21% ROI = ROI increased from 15% to 21%. ROI = Margin ° Turnover    Net operating income                    Sales                  Sales                 Average operating assets × ROI  =
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7/7/11 Decreasing Operating Expenses with no Change in Sales or Operating Assets Assume that Regale's manager was able to reduce operating expenses by $10,000, without affecting sales or operating assets. This would increase net operating income to $40,000.
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