Billy Twist Ltd has two profit centres: a grocery store based in London, Ontario, and a...

 

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Billy Twist Ltd has two profit centres: a grocery store based in London, Ontario, and a second store based in Niagara Falls, Ontario. Consider the following data. a) abcd Average Operating Assets Current Liabilities Operating Income Total Capital Employed Minimum Required Rate of Return London, Ontario $6,000,000 2,800,000 840,000 3,750,000 10% Niagara Falls, Ontario $2,500,000 $500,000 200,000 1,500,000 10% Calculate the return on investment (ROI) for each division (4 marks) Based on the ROI calculated in part (a), which division is more profitable and why? (2 marks) Calculate the residual income (RI) for each division (4 marks) Based on the RI calculated in part (c), which division has a better RI and why? (2 marks) Billy Twist Ltd has two profit centres: a grocery store based in London, Ontario, and a second store based in Niagara Falls, Ontario. Consider the following data. a) abcd Average Operating Assets Current Liabilities Operating Income Total Capital Employed Minimum Required Rate of Return London, Ontario $6,000,000 2,800,000 840,000 3,750,000 10% Niagara Falls, Ontario $2,500,000 $500,000 200,000 1,500,000 10% Calculate the return on investment (ROI) for each division (4 marks) Based on the ROI calculated in part (a), which division is more profitable and why? (2 marks) Calculate the residual income (RI) for each division (4 marks) Based on the RI calculated in part (c), which division has a better RI and why? (2 marks)

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a Return on Investment ROI Calculation To calculate ROI we use the formula ROI Operating Income Tota... View the full answer