Figure 19-2
the Following Results for the Year Pertain to the Northern

question 41

Multiple Choice

Figure 19-2
The following results for the year pertain to the Northern Division of Garvey Ltd.: $\begin{array}{lr}\text { Sales } & £ 400,000 \\\text { Taxes } & 60,000 \\\text { Operating income after taxes } & 160,000\end{array}$
-Refer to Figure 19-2. If Northern's average operating assets are £1,200,000 and their minimum required rate of return is 12 per cent, what is the Northern Division's return on investment?

• A)33.3%
• B)18.3%
• C)13.3%
• D)12.0%

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Definitions:

Allowance Method

A method of accounting that estimates and sets aside an amount for potentially uncollectible receivables.

Bad Debts

Receivables from accounts deemed not collectable, which constitute financial losses for the business.

Accounts Receivable Turnover

A financial ratio that measures how many times a company collects its average accounts receivable balance within a specific period.

Net Sales

The net sales revenue of a company, calculated after deducting returns, allowances for damage or loss, and any discounts.