Multiple Choice QuestionDivision ABC has $750,000 in average assets and income of $200,000. Division XYZ has $800,000 average assets and income of $210,000. Which of the following statements is true?Multiple choice question.Division XYZ has higher income and, therefore, a higher return on investment.Division XYZ has a higher return on investment.Division ABC has less invested in assets and, therefore, has a lower return on investment.Division ABC has a higher return on investment.
Question
Multiple Choice QuestionDivision ABC has 200,000. Division XYZ has 210,000. Which of the following statements is true?Multiple choice question.Division XYZ has higher income and, therefore, a higher return on investment.Division XYZ has a higher return on investment.Division ABC has less invested in assets and, therefore, has a lower return on investment.Division ABC has a higher return on investment.
Solution
To answer this question, we first need to calculate the Return on Investment (ROI) for both divisions.
ROI is calculated by dividing the income by the average assets and multiplying by 100 to get a percentage.
For Division ABC: ROI = (Income / Average Assets) * 100 ROI = (750,000) * 100 ROI = 26.67%
For Division XYZ: ROI = (Income / Average Assets) * 100 ROI = (800,000) * 100 ROI = 26.25%
Comparing the two ROIs, we can see that Division ABC has a higher ROI than Division XYZ.
Therefore, the correct answer is "Division ABC has a higher return on investment."
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