Question

Gobi Corporation's electronics division reported an ROI of 9% for the current period. The division's return...

Gobi Corporation's electronics division reported an ROI of 9% for the current period. The division's return on sales for the period was 15%, and its operating revenue was $240,000.

1. The division's capital turnover for the period was _ %.

2. The division's average investment in assets for the period was $ _?

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Answer #1
1
Calculate capital turnover for the period
Return on investment Return on sales*Capital turnover
9% 15%*Capital turnover
Capital turnover 60.0%
Thus, capital turnover for division is 60%
2
Calculate division average investment for period
Return on sales Operating net income/Operating revenue
15% Operating net income/240000
Operating income 15%*240000
Operating income 36000
Calculate average investment using return on income
Return on income Operating net income/Average investment
9% 36000/Average investment
Average investment 36000/9%
Average investment $400,000
Thus, average investment is $400,000
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