Response to the following problem:
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):
|
|
Osaka
|
Yokohama
|
|
Sales ............................................................................
|
¥3,000,000
|
¥9,000,000
|
|
Net operating income..................................................
|
¥210,000
|
¥720,000
|
|
Average operating assets ..........................................
|
¥1,000,000
|
¥4,000,000
|
Required:
1. For each division, compute the return on investment (ROl) in terms of margin and turnover. Where necessary, carry computations to two decimal places.
2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 15%. Compute the residual income for each division.
3. Is Yokohama's greater amount of residual income an indication that it is better managed?explain.