Input the formulas need to calculate margin, turnover, ROI and residual income.
Check your worksheet by changing the average operating assets in cell B6 to $9,000,000, net operating income in cell B5 to $5,400,000 and the minimum required rate of return in cell B7 to 16%. The ROI should nw 60% and the residual income should now be $3,960,000. If you do not get these answers, find the errors in your worksheet and correct them.
Enter a formula into each of the cells marked with a ? below
Review Problem: Return on Investment (ROI) and Residual Income
Data:
Sales $25,000,000
Net operating income $3,000,000
Average operating assets $10,000,000
Minimum required rate of return 25%
Compute the ROI:
Margin ?
Turnover ?
ROI ?
Compute the residual income :
Average operating assets ?
Net operating income ?
Minimum required return ?
Residual income ?