Question

Please answer the following questions:

Q1How is the return on investment (ROI) calculated?

a. Operating income divided by the investment in operating assets

b. Operating income divided by sales

c. Sales divided by investment

d. All of the above

Q2 Return on Sales (ROS) is a measure of which of the following?

a. Operating income as a percentage of assets

b. The number of pennies left over from each dollar of sales after covering all costs

c. The amount of extra income after a division earns a minimum ROI

d. None of the above

Q3 Which of the following is not a type of business segment?

a. Cost Center

b. Investment Center

c. Management Center

d. Profit Center

Q4 Amos Manufacturing has two major departments. Management wants to compare their relative performance. Information related to the two departments is as follows:

Department 1:
Sales:	$400,000
Expenses:	250,000
Asset investment:	950,000
Department 2:
Sales:	$75,000
Expenses:	45,000
Asset investment:	400,000

What is the Return on Sales (ROS) for Department 2?

a. 20%

b. 30%

c. 40%

d. 50%

Answer 1

Q1:a) Operating income divided by the investment in operating assets. Return on Investment is a ratio of a profit or loss made in a fiscal year expressed in terms of an investment.

Q2:(b)The number of pennies left over from each dollar of sales after covering all costs. The Return on Sales (ROS) is a percentage measure, used to indicate how efficiently a business transforms sales into profits, e.g. the amount of profit generated per dollar earned.

Q3. (c) Management Centre, there are basically only four types of business segments, cost, revenue, investment and profit centre and management centre is not one of it.

Q4.(c):40%

Return on Sales = operating income / Revenue

=(75000-45000)/75000*100=40%