Answer:
Both divisions are showing equal performance with an ROI of 14%.
Explanation:
The financial figures given have been organized as follows:
Consumer ($) Commercial ($)
Sales revenue 22,000 37,000
Divisional income 3,850 3,885
Divisional investment 27,500 27,750
Current liabilities 1,000 800
R&D 1,000 1,000
The resulting calculations are as follows:
Divisional ROI = Divisional income / Divisional investment
Consumer division ROI = $3,850 / $27,500 = 0.1400, or 14%
Commercial division ROI = $3,885 / $27,750 = 0.1400, or 14%
This illustrates that investment returns are equal at 14% for both divisions.
