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 = 18,000; average assets = 60,000; income = 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
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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