Skyline Industries of London has two divisions that operate inLondon and Liverpool. Data for the two divisions is shownbelow:
London Liverpool
Sales $6,000,000 $15,000,000
Net OperatingIncome $420,000 $1,350,000
Average OperatingAssets $2,000,000 $7,500,000
Required:
1. Computer the Return on Investment (ROI) for each division.
2. Assume the company evaluates performance using residual income andthat the minimum required rate of return for any division is 15%.Compute the residual income for each division.
3. Based on your results from questions 1 & 2, which division doyou feel is better managed? Why?
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