Exercise 2

Selected operating data for two divisions of Outback Brewing, Ltd., of Australia, are given below (the
currency is the Australian dollar, denoted here as $):

DIVISION

Quensland New South Wales

Sales $ 4.000.000 $ 7.000.000
Average operating assets $ 2.000.000 $ 2.000.000
Net operating income $ 360.000 $ 420.000
Property, plant, and equipment (net) $ 950.000 $ 800.000
Required:
1. Compute the rate of return for each division using the return on investment (ROI) formula
stated in forms of margin and turnover.
2. Which divisional manager seems to be doing the better job? Why?

Meiji Isetan Corp., of Japan, has two regional divisions with headquarters in Osaka and Yokohama.
Selected data on the two divisions follow (in millions of yen, denoted by ¥):
DIVISION

Osaka Yokohama
Sales ¥ 3.000.000 ¥ 9.000.000
Average operating assets ¥ 1.000.000 ¥ 4.000.000
Net operating income ¥ 210.000 ¥ 720.000

Required:
Compute the return on investment (ROI) in terms of margin and turnover..

Jawaban
1. Quensland = (4.000.000 – 2.000.000) = 2.000.000 x 100% =20%
New south wales = 7.000.000-2.000.000= 5.000.000 x 100% = 50%
2. New south wales because the shares he uses are larger