Ch 10.1
margin
All other things the same, _________ is ordinarily improved by increasing selling prices, reducing operating expenses, or increases unit sales.
leverage
Because of operating _________, a given percentage increase in unit sales usually leads to an even larger percentage increase in net operating income.
operating assets
Examples not included in _________ are land held for future use, an investment in another company, or a building rented to someone else.
turnover
Excessive funds tied up in operating assets depress _________ and lower ROI.
average operating assets
Most companies use the net book value (i.e. acquisition cost less accumulated depreciation) of depreciable assets to calculate _________.
higher
The _________ a business segment's ROI, the greater the profit earned per dollar invested in the segment's operating assets.
operating asset
The _________ base used in the ROI formula is typically computed as the average of the operating assets between the beginning and end of the year.
return on investment
_________ = margin * turnover
return on investment
_________ = net operating income / average operating assets
margin
_________ = net operating income / sales
turnover
_________ = sales / average operating assets
operating assets
_________ include cash, accounts receivable, inventory, plant and equipment, and all other assets held for operating purposes.
return on investment
_________ is defined as net operating income divided by average operating assets.
net operating income
_________ is income before interest and taxes and is sometimes referred to as EBIT (earnings before interest and taxes).
net operating income
_________, rather than net income, is used in the ROI formula. This is used because the base (denominator) consists of operating assets.