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: $$\begin{array} { l l c }
& \text { Retail Division } & \text { Wholesale Division } \
\text { Operating income } & \$ 2,500,000 & \$ 6,000,000 \
\text { Operating assets } & \$ 16,000,000 & \$ 36,000,000
\end{array}$$ 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 division 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: $$\begin{array} { l l c } 
& \text { Retail Division } & \text { Wholesale Division } \
\text { Operating income } & \$ 2,500,000 & \$ 6,000,000 \
\text { Operating assets } & \$ 16,000,000 & \$ 36,000,000
\end{array}$$ 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 division have the same results.
D) The answer cannot be determined using the information provided.

Quizplus · Accepted Answer

Based on ROI, the Wholesale Division has performed better as it has achieved an ROI of 17.5% which is higher than the target ROI of 15%. The Retail Division has only achieved an ROI of 12% which is lower than the target ROI.

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