Question

The sales, income from operations, and invested assets for each division of Grosbeak Company are as
follows:

Sales
Income from
Operations

Invested
Assets
Division E $5,000,000 $550,000 $2,400,000
Division F 4,800,000 860,000 2,500,000
Division G 7,000,000 860,000 2,900,000
(a) Using the expanded expression, determine the profit margin, investment turnover, and
rate of return on investment for each division. Round to one decimal place.
(b) Which is (are) the most profitable per dollar invested?

ANS: (a)
a) Division

E

b) Division
F

c) Division
G

ANS: (b)

Answer 1

(a) Using the expanded expression, determine the profit margin, investment turnover, and
rate of return on investment for each division.

	Division E	Division F	Division G
Profit margin	550000*100/5000000 = 11%	860000*100/4800000 = 17.9%	860000*100/7000000 = 12.3%
Investment turnover	5000000/2400000 = 2.1	4800000/2500000 = 1.9	7000000/2900000 = 2.4
Return on investment	550000*100/2400000 = 22.9%	860000*100/2500000 = 34.4%	860000*100/2900000 = 29.7%

(b) Which is (are)the most profitable per dollar invested

So answer is b) Division F