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1. Adventure Sports Company makes snowboards, downhill skis, cross-country skis, skateboards, surfboards, and in-line skates. The company has found it beneficial to split operations into two divisions based on the climate required for the sp Snow Sports and Non-Snow Sports. The following divisional information is available for the past year: (Click the icon to view the divisional information.) 1. Calculate each division's ROI. 2. Top management has extra funds to invest. Which division will most likely receive those funds? Why? 3. Can you explain why one division's ROI is higher? How could management gain more insight? 1. Calculate each division's ROI. Enter the formula, and then calculate each division's ROI. (Enter the ROI as a percent rounded to one decimal place, X.X%.) (1) (2) ROI Snow Sports % Non-Snow Sports % 2. Top management has extra funds to invest. Which division will most likely receive those funds? Why? The (3) will most likely receive those funds because it has (4) 3. Can you explain why one division's ROI is higher? (5) How could management gain more insight? (6) 1: Divisional information Operating Total Current Sales Income Assets Liabilities 470,000 Snow Sports $ 5,300,000 $ Non-Snow Sports .... 8,300,000 940,000 $4,000,000 $ 1,271,000 6,200,000 745,000 Adventure Sports management has specified a target 20% rate of return. The company's weighted average cost of capital (WACC) is 12%, and its effective tax rate is 36%. Total current liabilities Total current liabilities () (3) O snow sports division O non-snow sports division O greater total assets. O lower liabilities. (1) O Operating income Sales Total assets (2) O Operating income O Sales Total assets (4) O a higher ROI. O a lower ROI. O greater operating income. O greater sales. OOOO O Use the expanded ROI formula. 5) (5) Non-snow sports division has greater operating income Non-snow sports division has greater sales O Snow sports division has fewer liabilities There is not enough information to explain why one ROI is greater. (6) O Calculate the current ratio. . O Interview customers. Interview employees. O Look at individual asset accounts.

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