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Q6SE

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Horngren'S Financial And Managerial Accounting
Found in: Page 1357

Short Answer

Consider the following data, and determine which of the corporate divisions is more profitable. Explain your reasoning.

Domestic International

Operating income $ 10,000,000 $ 11,000,000

Average total assets 24,000,000 32,000,000

The return on assets of domestic division is 41.67%, international division is 34.38% and domestic division is better than international division.

See the step by step solution

Step by Step Solution

Step 1 Computation of return on assets for domestic

Step 2 : Computation of return on assets for international

Step 3 : Checking the profitability of the divisions

The domestic division is more profitable as the return on assets of the domestic division is more than that of the international division as computed in steps 2 and step 3.

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