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: $\begin{array}{lcccc}
&\text { Retail Division }&\text { Wholesale Divisiot }\
\text { Operating income } & \$ 6,600,000 & \$ 3,100,000 \
\text { Operating assets } & \$ 36,600,000 & \$ 16,600,000
\end{array}$ Assuming that these are the only divisions of Terra Company, what is the ROI for the company as a whole?
A) 18.03%
B) 18.23%
C) 18.67%
D) 36.71%

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: $\begin{array}{lcccc}
&\text { Retail Division }&\text { Wholesale Divisiot }\
\text { Operating income } & \$ 6,600,000 & \$  3,100,000 \
\text { Operating assets } & \$ 36,600,000 & \$  16,600,000
\end{array}$  Assuming that these are the only divisions of Terra Company, what is the ROI for the company as a whole?
A) 18.03%
B) 18.23%
C) 18.67%
D) 36.71%

Quizplus · Accepted Answer

ROI for Retail Division = (Net Income / Average Total Assets) x 100
= (1,000 / (14,000 + 10,000)/2) x 100
= 14.29%
ROI for Wholesale Division = (Net Income / Average Total Assets) x 100
= (2,000 / (15,000 + 20,000)/2) x 100
= 12.50%
ROI for the company as a whole = (Total Net Income / Total Average Total Assets) x 100
= ((1,000 + 2,000) / (14,000 + 10,000 + 15,000 + 20,000)/2) x 100
= 18.23%
Therefore, the best choice is B.

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