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Gabbe Industries is a division of a major corporation. Last year the division had total sales of $23,510,300, net operating income of $2,562,623, and average operating assets of $7,018,000. The company's minimum required rate of return is 22%.
Required:
a. What is the division's margin?
b. What is the division's turnover?
c. What is the division's return on investment (ROI)?

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zainsubhani

Answer:

Part A:

Division's margin= 10.9%

Part B:

Division's turnover=3.35 time

Part C:

The division's return on investment (ROI)= 36.5%

Explanation:

Part A:

Division's margin=[tex]\frac{Net\ operating\ income}{Total\ Sales}[/tex]

Division's margin= $2,562,623/$23,510,300

Division's margin= 0.109

Division's margin= 10.9%

Part B:

Division's turnover=[tex]\frac{Total\ Sales}{Average\ Operating\ Assets}[/tex]

Division's turnover=$23,510,300/$7,018,000

Division's turnover=3.35 time

Part C:

The division's return on investment (ROI)=[tex]\frac{Net\ operating\ income }{Average\ operating\ assets }[/tex]

The division's return on investment (ROI)= $2,562,623/$7,018,000

The division's return on investment (ROI)= 0.365

The division's return on investment (ROI)= 36.5%

Answer:

division's margin is 10.90%

division's turnover is 3.35 times

Division's ROI is 36.52%

Explanation:

Division's margin=net operating income/total sales

net operating profit is $2,562,623

total sales is $23,510,300

division's margin= $2,562,623/$23,510,300*100%

                           =10.90%

Division asset turnover=total sales/average operating assets

total sales is $23,510,300

average operating assets is $7,018,000

division's asset turnover=$23,510,300/$7,018,000

                                        =3.35 times

Return on investment=Net operating income/average operating assets

net operating income is $2,562,623

average operating assets is $7,018,000

division's return on investment=$2,562,623/$7,018,000*100%

                                                  =36.52%

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