Gray Corp. has three divisions that are classiï¬ed as invest- ment centers. Selected ï¬nancial information about the
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(a) Calculate the return on investment for each division. How would you rank the divisions in terms of levels of performance?
(b) Calculate the proï¬t margin and asset turnover for each division. How would you rank the divisions in terms of levels of performance?
(c) Assume that the manager of Division 1 was new to her job. She has found that the previous man- ager did not dispose of approximately $4,800,000of assets that were no longer being used by the division to manufacture products. Exclude these assets from the asset base and recalculate the asset turnover and return on investment for Division 1. Does this information affect your rankings of the divisions performance? Explain.
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
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