If the operating asset turnover ratio increased by 30 percent and the margin increased by 20 percent,the divisional ROI
A)would increase by 56 percent.
B)would decrease by 60 percent.
C)would increase by 20 percent.
D)cannot be determined.

Question

Quizplus · Accepted Answer

The divisional ROI is calculated as the product of the operating asset turnover ratio and the margin. If the turnover ratio increases by 30% and the margin increases by 20%, the overall increase in ROI would be (1.3 * 1.2) - 1 = 0.56 or 56%.

If the Operating Asset Turnover Ratio Increased by 30 Percent