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Multiple Choice QuestionDivision A reports the following data: sales = $180,000; income = $18,000; average assets = $72,000. Division B reports the following data: sales = $60,000; income = $9,600; average assets = $48,000. Which division is operating more efficiently?Multiple choice question.Division B because it has higher profit marginDivision B because it has higher investment turnoverDivision A because it has more salesDivision A because it has higher return on investment

Question

Multiple Choice QuestionDivision A reports the following data: sales = 180,000;income=180,000; income = 18,000; average assets = 72,000.DivisionBreportsthefollowingdata:sales=72,000. Division B reports the following data: sales = 60,000; income = 9,600;averageassets=9,600; average assets = 48,000. Which division is operating more efficiently?Multiple choice question.Division B because it has higher profit marginDivision B because it has higher investment turnoverDivision A because it has more salesDivision A because it has higher return on investment

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Solution

To determine which division is operating more efficiently, we need to calculate the Return on Investment (ROI) for both divisions.

ROI is calculated as follows: ROI = (Income / Average Assets) * 100%

For Division A: ROI = (18,000 / 72,000) * 100% = 25%

For Division B: ROI = (9,600 / 48,000) * 100% = 20%

Therefore, Division A is operating more efficiently because it has a higher return on investment. So, the correct answer is "Division A because it has higher return on investment".

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