Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year: Terra Company has set a target return on investment (ROI) of 15% for both divisions. Based on ROI, which division appears to have performed better?
A) Retail division.
B) Wholesale division.
C) Both divisions have the same results.
D) The answer cannot be determined using the information provided.

Question

Terra Company has two divisions, the Retail Division and the Wholesale Division. The following information was gathered for the two divisions for the current year:  Terra Company has set a target return on investment (ROI) of 15% for both divisions. Based on ROI, which division appears to have performed better?
A) Retail division. 
B) Wholesale division. 
C) Both divisions have the same results. 
D) The answer cannot be determined using the information provided.

Quizplus · Accepted Answer

ROI = Operating income ÷ Operating assets
Retail division:
ROI = $2,500,000 ÷ $16,000,000 = 15.6%
Wholesale division:
ROI = $6,000,000 ÷ $36,000,000 = 16.7%
Based on ROI, the wholesale division performed better.

Terra Company Has Two Divisions, the Retail Division and the Wholesale