Astin Ltdrequires All of Its Divisions to Maintain a Return on on Investment

question 57

Multiple Choice

Astin Ltd.requires all of its divisions to maintain a return on investment (ROI) of at least 25 per cent.Over the past several years,one of Astin's divisions has consistently had the following information:
$\begin{array}{lr} \text {Sales } &\$2000000\\ \text {Net operating income } &500000\\\end{array}$

In order to achieve the company's ROI goals,this division should do which of the following?

• A) Maintain average operating assets of $2 000 000 or more.
• B) Maintain average operating assets of $2 000 000 or less.
• C) Maintain average operating assets of $125 000 or more.
• D) Maintain average operating assets of $125 000 or less.

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Definitions:

Stockholders' Equity

The ownership interest of shareholders in the assets of a corporation, after all liabilities have been subtracted.

Accounts Payable

The amounts owed by a business to its suppliers or creditors for goods and services received, representing short-term liabilities.

Accounts Receivable

Funds that are due to a company from its clients for the delivery of goods and services which payment is pending.

Net Assets

The total assets of a company minus its total liabilities; a measure of its financial health and value.