Two Divisions of Crowson Company (Divisions X and Y)have the Same

question 15

Multiple Choice

Two divisions of Crowson Company (Divisions X and Y) have the same profit margins.Division X's investment turnover is larger than that of Division Y (1.2 to 1.0) .Which of the following statements is true?

• A)Division Y will have a higher return on investment as it is using its assets more efficiently in generating sales.
• B)Division X will have a higher return on investment as it is generating more income from its operations.
• C)Division X will have a higher return on investment as it is using its assets more efficiently in generating sales.
• D)Division Y will have a higher return on investment as it is generating more income from its operations.

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Definitions:

Straight-Line Method

A method of calculating depreciation of an asset, which assumes the asset will lose an equal amount of value each year over its useful life.

Residual Value

The estimated value that an asset will have at the end of its useful life, also known as salvage value.

Gain Or Loss

The difference between the selling price and the purchase price of an asset, resulting in a financial profit or loss.

Disposal Of Equipment

The process of selling, scrapping, or eliminating machinery or equipment that is no longer needed.