Bear Paints is a national paint manufacturer and retailer. The company is segmented into five divisions: Paint Stores (branded retail locations), Consumer (paint sold through home improvement stores), Automotive (sales to auto manufacturers), International, and Administration. The following is selected divisional information for its two largest divisions: Paint Stores and Consumer:

Management has specified a 21% target rate of return. 

Requirements 

1. Calculate each division’s ROI. Round all of your answers to four decimal places. 

2. Calculate each division’s profit margin ratio. Interpret your results. 

3. Calculate each division’s asset turnover ratio. Interpret your results. 

4. Use the expanded ROI formula to confirm your results from Requirement 1. Interpret your results. 

5. Calculate each division’s RI. Interpret your results and offer a recommendation for any division with negative RI. 

6. Describe some of the factors that management considers when setting its mini-mum target rate of return.

Transcribed Image Text:

Operating Average Net Sales Income Total Assets Paint Stores $3,940,000 477,000 1,410,000 185,000 1,575,000 Consumer 1,310,000