Ask Question
26 August, 08:07

Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year: Retail Division Wholesale Division Operating income $ 2,500,000 $ 6,000,000 Operating assets $ 16,000,000 $ 36,000,000 Terra Company has set a target return on investment (ROI) of 15% for both divisions. Based on ROI, which division appears to have performed better?

a. Wholesale division.

b. The answer cannot be determined using the information provided.

c. Both divisions have the same results.

d. Retail division.

+4
Answers (1)
  1. 26 August, 11:24
    0
    a. Wholesale division.

    Explanation:

    The formula to compute for return on investment is shown below:

    Return on investment = Operating Income : Operating Assets

    For Retail Division, it would be

    = $2,500,000 : $16,000,0000

    = 15.625%

    For Wholesale Division, it would be

    = $6,000,000 : $36,000,0000

    = 16.67%

    Based on the calculation, the wholesale division perform better
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers