Two divisions of Crowson Company (Divisions X and Y)have the same profit margins.Division X's investment turnover is larger than that of Division Y (1.2 to 1.0).Which of the following statements is true?
A)Division Y will have a higher return on investment as it is using its assets more efficiently in generating sales.
B)Division X will have a higher return on investment as it is generating more income from its operations.
C)Division X will have a higher return on investment as it is using its assets more efficiently in generating sales.
D)Division Y will have a higher return on investment as it is generating more income from its operations.

Question

Quizplus · Accepted Answer

The investment turnover ratio measures how efficiently a company uses its assets to generate sales. With Division X having a higher investment turnover ratio, it means that it is using its assets more efficiently in generating sales compared to Division Y. Thus, Division X can generate more revenue from the same amount of assets compared to Division Y. Therefore, Division X is expected to have a higher return on investment.

Two Divisions of Crowson Company (Divisions X and Y)have the Same