Global Electronics Company The Computer Division of Global Electronics Company had the following financial data for the year:
Refer to Global Electronics Company.If expenses increased by $20,000 in the Computer Division,
A)return on investment would decrease.
B)residual income would increase.
C)the target rate of return would decrease.
D)asset turnover would decrease.

Question

Global Electronics Company The Computer Division of Global Electronics Company had the following financial data for the year:
 Refer to Global Electronics Company.If expenses increased by $20,000 in the Computer Division,
A)return on investment would decrease. 
B)residual income would increase. 
C)the target rate of return would decrease. 
D)asset turnover would decrease.

Quizplus · Accepted Answer

If expenses increase, it would decrease the net income, which would lead to a decrease in return on investment (ROI). ROI is calculated as net income divided by total assets. Therefore, an increase in expenses would decrease net income and lower ROI. Residual income and the target rate of return are not directly affected by an increase in expenses. Asset turnover would also not be directly affected by an increase in expenses.

Global Electronics Company the Computer Division of Global Electronics Company