Aysaac Gabrielle D.

Arnecillo BSCPE 301

1. In my opinion, I think the management should not continue with this decision. If they ever continue
with the decision of awarding those high profiting divisions, then, they only look at the situation at a
shallow rate. If they say they are evaluating each division’s performance, they should compute for the
Return on Investments (ROI) of each division. By doing so, they will come up with the splint division
having the higher ROI than the other divisions. The Booboo division has an estimated of 8% ROI, The
splint division with an ROI of 9.8%, and the intensive care division with an ROI of 6%. Naturally the
intensive care and booboo division will yield higher profits because they also have higher ass. However,
the splint division outperforms those 2 divisions, hence, the award should be given to the splint division.

2.
ROA = Income / Average total assets
ROA = 20,000,000 / 1,000,000 + 2,000,000
ROA = 20,000,000 / 3,000,000
ROA = 6.67 or 667%
Meaning Charlie’s construction company is earning more money on less investments.

3.
Debt Ratio = Total Liabilities / Total Assets
Debt Ratio = 25,000 / 5,000,000
Debt Ratio = 0.005 or 0.5%
Meaning the total liabilities are lower than assets and it ensures that the company is financially healthy
and it is also a good sign that they can pay for the bank loan.