heiji Isetan Corp of Japan has two regional divisions with h

heiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected ata on the two divisions follow: Division Sales Net operating income Average operating assets OsakaYokohama 9,200,000 $22,000,000 S 552,000 $ 1,760,000 2,300,000 $11,000,000 Required: 1. For each division, compute the return on investment (ROl) in terms of margin and turnover. (Do not round intermediate calculations. Enter your answers as a percent (ie., 0.12 should be entered as 12).) Osaka Yokohama ROI

Solution

Rreq 1 Osaka Yokohama Sales 9200000 22,000,000 Net income 552000 1,760,000 Average operating assets 2300000 11000000 Margin ratio 6% 8% (Net income/sales) Assets turnover ratio 4 2 (sales/ Average assets) Return on investment 24% 16% (margin ratio*Assets turnover) Req 2 Osaka Yokohama Average assets 2300000 11000000 Net income 552000 1760000 Min required rate of return 299000 1430000 Residual income $253,000 $330,000 Req 3: No, it is not an indication of better management