Asked by Prince Osman on May 20, 2024
Verified
Tipton Division's average operating assets last year were:
A) $625,000
B) $250,000
C) $416,677
D) $333,333
Average Operating Assets
The mean worth of resources employed in the functioning of a company throughout a given timeframe.
- Analyze financial indicators including net operating income and average operating assets to assess fiscal health.
Verified Answer
MB
Marisa BalzanoMay 22, 2024
Final Answer :
A
Explanation :
ROI = Net operating income ÷ Average operating assets
20% = Net operating income ÷ Average operating assets
Net operating income = 20% × Average operating assets
Residual income = Net operating income - (Average operating assets × Minimum required rate of return)
$50,000 = Net operating income - (Average operating assets × 12%)
$50,000 = (20% × Average operating assets)- (Average operating assets × 12%)
$50,000 = 8% × Average operating assets
Average operating assets = $50,000 ÷ 8% = $625,000
20% = Net operating income ÷ Average operating assets
Net operating income = 20% × Average operating assets
Residual income = Net operating income - (Average operating assets × Minimum required rate of return)
$50,000 = Net operating income - (Average operating assets × 12%)
$50,000 = (20% × Average operating assets)- (Average operating assets × 12%)
$50,000 = 8% × Average operating assets
Average operating assets = $50,000 ÷ 8% = $625,000
Learning Objectives
- Analyze financial indicators including net operating income and average operating assets to assess fiscal health.