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Required information Exercise 10-11 Effects of Changes in Profits and Assets on Return on Investment (ROI) [LO10-1] Skip to question [The following information applies to the questions displayed below.]
Fitness Fanatics is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on return on investment (ROI). The company's Springfield Club reported the following results for the past year:
Sales $ 780,000
Net operating income $ 17,940
Average operating assets $ 100,000
The following questions are to be considered independently.
Assume that the manager of the club is able to reduce expenses by $3,120 without any change in sales or average operating assets.
What would be the club’s return on investment (ROI)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Respuesta :

anthougo

Answer:

Fitness Fanatics

Springfield Club

The return on investment (ROI) = = 21.06%

Explanation:

a) Data and Calculations:

Sales                                    $ 780,000

Net operating income           $ 17,940

Average operating assets $ 100,000

1. Assume that the manager of the club is able to reduce expenses by $3,120 without any change in sales or average operating assets, the return on investment would be:

= Net operating income/Average operating assets * 100

= ($ 17,940 + $3,120)/$ 100,000 * 100

= 21.06%

b) The return on investment metric measures an entity's financial performance, using the annual returns and average operating assets or initial investment cost.

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