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Question 9 A division has profit of $10 250, sales of $207 500 and an investment...

Question 9 A division has profit of $10 250, sales of $207 500 and an investment base of $112 500. If the required charge for capital is 14 per cent, determine the:

a. profit margin

b. asset turnover

c. return on investment

d. residual income.       

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Homework Answers

Answer #1
a) Profit Margin = Net Income / Sales
= $10250/207500
=4.94 %
b) Assets Turnover Ratio = Sales / average Assets
= $207500/112500
=1.84 times
C) Return On Investment = Net Income / Average Investment
= $10250/112500
=9.11 %
D) Minimum required return = $112500*14%
=$15750
Residual Income = $10250-15750
= -$5500
NOTE: ASK YOUR QUERIES.PLEASE DO UPVOTE
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