chapter 11 formulas Flashcards

1
Q

controllable margin

A

contribution margin - controllable fixed costs

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2
Q

Return on investment

A

Controllable margin / avg operating assets (total assets / #)

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3
Q

Residual Income

A

Controllable margin - (minimum ROI x Avg Operating assets)

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4
Q

Average Operating assets

A

add up all operating assets / # of assets you added up

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5
Q

Economic Value added

A

investment centre’s operating profit after tax - (weighted avg cost of capital x total capital assests)

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6
Q

Improving Roi - Expanded form

A

(operating income/ sales) x (sales / operating
assets) = ROI

Profit margin x investment turnover = ROI

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