A return on assets is not double that of B. C is not the best division at managing its assets. B would not benefit lease from a 10% increase in sales.
<h3> What are performance indicators?</h3>
A performance indicator, also known as a key performance indicator (KPI), is a tool for measuring performance that helps organizations to gauge the success of their initiatives, programs, and/or products.
Net profit of A = 10%
Return on sales A = 0.02
Asset turnover for A = 10
Net profit of B = 20%
Return on sales B = 0.06
Asset turnover for B = 5
Net assets of C = 80
Return on sales C = 0.04
Return on assets for C = 0.15
Now,
Net assets of A is given as
Sales A/ Asset turnover of A
=500/10
= $50
Return on assets for A = (net profit of A / net assets of A) × 100
= (10/ 50) × 100
= 20%
Similarly for B,
Sales of B = net profit/ return on sales
= 20/0.06
= $333.33
Net assets of B = Sales B/ Asset turnover of B
= 333.33/ 5
= $66.67
Return on assets for B = (net profit of B / net assets of B) × 100
= (20/66.67) × 100
= 30%
For C,
Net profit of C = net assets × return on assets
= 80 × 0.15
= $12
Sales of C = net profit/ return on sales
= 12/0.15
=$ 300
Asset turnover of C = sales C/ net assets of C
=300/12
= $3.75
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