Comparing profit margin and ROI as performance measures. College Coffee Shops operates coffeehouses on college campuses in three districts. The operating performance for each district follows.
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District
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|
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New_Orleans
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Chicago
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Denver
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Sales
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$1,900,000
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$8,500,000
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$10,000,000
|
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Operating Profit
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200,000
|
500,000
|
1,000,000
|
|
Investment
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2,000,000
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6,250,000
|
8,000,000
|
a. Using the operating profit margin percentage as the criterion, which is the most profitable district?
b. Using the rate of return on investment as the criterion, which is the most profitable district?
c. Which of the two measures better indicates operating performance? Explain your reasoning.