Given the Following Information for the Northern Division $$\begin{array} { l l } \text { Asset base } & \$ 500,000 \\\text { Sales revenues } & \$ 725,000 \\\text { Expenses } & \$ 662,500\end{array}$$

question 75

Essay

Given the following information for the Northern Division:
$$\begin{array} { l l } \text { Asset base } & \$ 500,000 \\\text { Sales revenues } & \$ 725,000 \\\text { Expenses } & \$ 662,500\end{array}$$
Required:
A. What is the margin, turnover, and ROI for the Northern Division?
B. The Northern Division has an option to make an additional investment that would add $100,000 to the asset base. It would generate an additional $50,000 in sales revenue and no additional expenses. What would be the effect on margin, turnover, and ROI?
C. Another alternative (independent of alternative B) for the Northern Division is to run an advertising campaign that would require additional advertising expenses of $37,500, but the best estimate is the campaign would generate an additional $75,000 of revenue. What would be the effect on margin, turnover, and ROI?

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Definitions:

Equity Method

An accounting technique used to record an investor's earnings in proportion to their ownership stake in a company.

Periodic Net Income

Periodic net income refers to the total earnings of a company, after accounting for all expenses and taxes, over a specific financial reporting period.

Brokerage Fees

Charges that are paid to a broker for executing transactions or providing specialized services.

Common Stock

A form of corporate equity ownership, a type of security that represents ownership in a corporation and gives holders voting rights and a share in the company's profits through dividends.