Question: Division Qs current turnover is 2 and its return on sales ratio is 0.8. The division is considering a sales promotion that would increase its

Division Q’s current turnover is 2 and its return on sales ratio is 0.8. The division is considering a sales promotion that would increase its current return on sales ratio by 20%, but decrease its turnover by 20%.

Required

(a) If the division undertakes this promotion, by what percentage would the return on investment increase or decrease?

(b) If the division undertakes this promotion, by what percentage will the return on sales ratio need to increase in order for the return on investment to increase by 10%?

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