Terra Company Has Two Divisions,the Retail Division and the Wholesale

question 103

Multiple Choice

Terra Company has two divisions,the Retail Division and the Wholesale Division.The following information was gathered for the two divisions for the current year: $$\begin{array} { l l c } & \text { Retail Division } & \text { Wholesale Division } \\\text { Operating income } & \$ 2,500,000 & \$ 6,000,000 \\\text { Operating assets } & \$ 16,000,000 & \$ 36,000,000\end{array}$$ Terra Company has set a target return on investment (ROI) of 15% for both divisions.Based on ROI,which division appears to have performed better?

• A) Retail division.
• B) Wholesale division.
• C) Both division have the same results.
• D) The answer cannot be determined using the information provided.

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Definitions:

Short-Term Investments

Investments that are typically held for one year or less, intended for quick gains or temporary cash investment.

Sinking Funds

A type of savings account or fund that is set up to repay debt or an outstanding loan, making periodic payments into the fund for this purpose.

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell the products, and collect cash from the sales.

Maturity Value

The total amount payable to an investor at the end of a bond's term, including both the principal and the interest.