In the following list, assume each transaction is independent of the others. Each of these transactions occurs in a single division of Frangling International, a multidivision company. Each transaction may impact capital turnover, ROI, and/or residual income. For each transaction, explain how capital turnover, ROI, and/or residual income are affected (increase, decrease, or no effect).
a. During the month of October, management decided to discontinue an advertising campaign that was scheduled to run throughout the holiday season because it was not affecting sales.
b. Additional bad debts were discovered due to poor economic conditions and they were written off during July.
c. During May, the division replaced the CFO at a higher salary than the predecessor.
d. Newly purchased equipment in August increased productive capacity but had no effect on sales.
e. During February the division raised the target rate of return from 10 percent to 12 percent because of an increase in the price of debt.
f. The division’s chief information officer left the organization in March and was not replaced at the same salary until September.