Multiple Choice
The Bandage Medical Supply Company has two divisions that operate independently of one another. The financial data for the year 20x3 reported the following results:
North South
Sales $3,000,000 $2,500,000
Operating income 750,000 550,000
Taxable income 650,000 375,000
Investment 6,000,000 5,000,000
The company's desired rate of return is 10%. Income is defined as operating income.
What are the respective return-on-investment ratios for the North and South Divisions?
a. 0.110 and 0.125
b. 0.108 and 0.075
c. 0.125 and 0.110
d. 0.050 and 0.150
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