Gas Supply Corporation Uses the Investment Center Concept for the Gasoline

question 3

Essay

Gas Supply Corporation uses the investment center concept for the gasoline stations that it manages in the city.Consolidated has a 15% required rate of return on investment in order for a branch station to be viable.Select operating data for three of its stations for 2015 are as follows:
$$\begin{array} { | l | r | r | r | } \hline & \text { Maple Street } & \text { Oak Street } & \text { High Street } \\\hline \text { Revenue } & \$ 17,000,000 & \$ 13,500,000 & \$ 15,000,000 \\\hline \text { Operating assets } & 7,000,000 & 7,000,000 & 6,000,000 \\\hline \text { Net operating income } & 900,000 & 1,200,000 & 980,000 \\\hline\end{array}$$ Required:
a.Compute the return on investment for each station.
b.Which station manager is doing best based only on ROI? Why?
c.Are any of the stations in danger of being closed due to lack of performance?
d.What other factors should be included when evaluating the managers?

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Definitions:

Financial Statements

Consolidated documents presenting the financial status, performance, and cash flows of a company, primarily comprising the balance sheet, income statement, and statement of cash flows.

Working Paper

Documents that record the detailed information and procedures used in an audit or financial analysis, serving as the basis for conclusions.

End-Of-Period Spreadsheet

A document used to gather all account balances at the end of an accounting period to prepare financial statements.

Prepaid Insurance

An asset account that represents insurance payments made in advance for coverage extending over future periods.