Stephanie Co.'s managers are considering alternative strategies to improve ROI from its current budgeted 20% for the coming year.Alternative 1 has more money spent on advertising to increase sales while alternative 2 has the budget for meals and entertainment expenses eliminated with a drop off in sales as a result.Adjustments to operating assets are anticipated in each of the two alternatives as well.The numbers as in the original budget and in the two alternatives are set out below: What is the relative ranking based upon ROI of the above three choices (highest to lowest)?

Question

Stephanie Co.'s managers are considering alternative strategies to improve ROI from its current budgeted 20% for the coming year.Alternative 1 has more money spent on advertising to increase sales while alternative 2 has the budget for meals and entertainment expenses eliminated with a drop off in sales as a result.Adjustments to operating assets are anticipated in each of the two alternatives as well.The numbers as in the original budget and in the two alternatives are set out below:  What is the relative ranking based upon ROI of the above three choices (highest to lowest)?

Quizplus · Accepted Answer

Alternative 1 has the highest anticipated ROI of 24%, followed by Alternative 2 with 16%. The Original Budget has the lowest anticipated ROI at 20%. Therefore, the best choice would be to implement Alternative 1, which has the highest anticipated ROI.