Use the Following Information to Answer Question Hays Company Has Set a Target Return on Investment (ROI)

question 92

Essay

Use the following information to answer Question. Renfro Company has two divisions, the Restaurants Division and the Commissary Division. The following information was gathered for the two divisions in 2012: $$\begin{array} { | l | l | l | } \hline & \begin{array} { l } \text { Restaurants } \\\text { Division }\end{array} & \begin{array} { l } \text { Commissary } \\\text { Division }\end{array} \\\hline \text { Operating Income } & \$ 4,000,000 & \$ 1,500,000 \\\hline \text { Operating Assets } & \$ 30,000,000 & \$ 10,500,000 \\\hline\end{array}$$
Hays Company has set a target return on investment (ROI) of 12% for both divisions.
Calculate residual income (RI) for the Restaurants Division and the Commissary Division. Based on RI, which division appears to have performed better?

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Definitions:

Soil Horizon

A layer parallel to the soil surface, whose physical characteristics differ from the layers above and beneath, as part of soil structure.

Net Primary Productivity

The rate at which plants in an ecosystem produce net useful energy (biomass) after accounting for the energy consumed through the process of respiration.

Ecosystem

A biological community of interacting organisms and their physical environment, considered a system through which nutrients are cycled and energy flows.

Average

A statistical measure representing the central or typical value in a set of data, commonly calculated by dividing the sum of all values by the number of values.