Return on Investment, Residual Income for a Service Company H&R Block Inc. provides tax preparation services throughout
Question:
Return on Investment, Residual Income for a Service Company H&R Block Inc. provides tax preparation services throughout the United States and other parts of the world. These services are provided through two segments: company-owned offices and franchised operations.
The recent financial information provided by H&R Block for its company-owned and franchised operations is as follows (in millions):
|
| ||||
Revenues | $2,651 | $ 335 | |||
Income from operations | 617 | 86 | |||
Total assets | 3,930 | 586 |
a. Use the DuPont formula to determine the return on investment for each business division. Round whole percents to one decimal place and investment turnover to two decimal places.
Division | Return on Investment |
Company-Owned | % |
Franchised Operations | % |
b. Determine the residual income for each division, assuming a minimum acceptable income of 15% of total assets. Round minimal acceptable return to the nearest million dollars.
Division | Residual income |
Company-Owned | $millions |
Franchised Operations | $millions |
c. The Franchised Operations (FO) segment has the lowest return on investment, which is mainly the result of a lower investment turnover
International Business Law and Its Environment
ISBN: 978-0324649659
7th Edition
Authors: Richard schaffer, Filiberto agusti, Beverley earle