Toro, a national manufacturer of lawn-mowing and snow-blowing equipment, segments its business according to customer type: Professional
Question:
_________________Sales Operating Income Total Assets
Residential..........$ 850,000........................$ 68,000.......................$200,000
Professional........$1,095,000........................$153,300.......................$365,000
Assume that management has a 25% target rate of return for each division. (All data in this exercise is hypothetical.)
Requirements
Round all of your answers to four decimal places.
1. Calculate each division's ROI.
2. Calculate each division's sales margin. Interpret your results.
3. Calculate each division's capital turnover. Interpret your results.
4. Use the expanded ROI formula to confirm your results from Requirement 1. What can you conclude?
5. Calculate each division's residual income (RI). Interpret your results.
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