chapter 11 formulas Flashcards
1
Q
controllable margin
A
contribution margin - controllable fixed costs
2
Q
Return on investment
A
Controllable margin / avg operating assets (total assets / #)
3
Q
Residual Income
A
Controllable margin - (minimum ROI x Avg Operating assets)
4
Q
Average Operating assets
A
add up all operating assets / # of assets you added up
5
Q
Economic Value added
A
investment centre’s operating profit after tax - (weighted avg cost of capital x total capital assests)
6
Q
Improving Roi - Expanded form
A
(operating income/ sales) x (sales / operating
assets) = ROI
Profit margin x investment turnover = ROI