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Homework answers / question archive / The following information is available for Viva Co

The following information is available for Viva Co

Accounting

The following information is available for Viva Co. for the month of June:

$450,000 $8,000 $500,000

Sales

Net profit

Total assets

Stockholder's equity $200,000

Cost of capital 6%

Calculate the ROI and residual income. 

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ROI = Net Profit/ Total assets

= 8000/500,000

=1.60%

 

Residual Income  = Operating Income - (desired Rate of Return x Investment in OA)

= 8000 -(6% x 500,000)

= $(22,000)

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