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Gaal Industries Is a Division of a Major Corporation

question 29

Essay

Gaal Industries is a division of a major corporation. Last year the division had total sales of $26,110,000, net operating income of $1,801,590, and average operating assets of $7,000,000. The company's minimum required rate of return is 18%.
Required:
a. What is the division's margin?
b. What is the division's turnover?
c. What is the division's return on investment (ROI)?


Definitions:

Residual Value

The projected sum an asset will fetch at the time of sale, once it has surpassed its lifespan.

Straight-Line Method

A method of calculating depreciation or amortization by evenly spreading the cost of an asset over its useful life.

Depreciation Expense

An accounting method to allocate the cost of a tangible asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.

Residual Value

The estimated value of an asset at the end of its useful life.

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