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: Retail Division Wholesale Division Operating income $ 7,500,000 $ 4,000,000 Operating assets $ 37,500,000 $ 17,500,000 Assuming that these are the only divisions of Terra Company, what is the ROI for the company as a whole?

Answer 1

Answer:

ROI = 20.90%

Explanation:

Operating Income:

= Operating Income of Retail Division + Operating Income of Wholesale Division

= $7,500,000 + $4,000,000

= $11,500,000

Operating Assets:

= Operating Assets of Retail Division + Operating Assets of Wholesale Division

= $37,500,000 + $17,500,000

= $55,000,000

ROI = (Operating Income ÷ Operating Assets) × 100

ROI = ($11,500,000 ÷ $55,000,000) × 100

ROI = 20.90%