Please show work where you can, thank you! The following information relates to
ID: 2422332 • Letter: P
Question
Please show work where you can, thank you!
The following information relates to the operating performance of two division of world Electronics, Inc., for last year. Compute the return on investment (ROI) of each division, using total assets at gross book value as the investment base. Compute the ROB of each division, using total assets net of accumulated depreciation (net book value) as the investment base. Which of the two measures do you think gives the better indication of operating performance Explain your reasoning.Explanation / Answer
Return on income = Operating profit/Total assets U S Division Australion division a) 15.00% 8.00% 3000000/20000000 4000000/50000000 b) 20.00% 11.43% 3000000/15000000 4000000/35000000 c) ROI calculated with assets net of accumulated depreciation is the better indicator for operating performance. As it considers the depreciated value of total assets.