Question

Adams Corporation’s balance sheet indicates that the company has $510,000 invested in operating assets. During 2018, Adams earned operating income of $52,020 on $1,020,000 of sales.

Required

1. Compute Adams’s profit margin for 2018.

2. Compute Adams’s turnover for 2018.

3. Compute Adams’s return on investment for 2018.

4. Recompute Adams’s ROI under each of the following independent assumptions:
   (1) Sales increase from $1,020,000 to $1,224,000, thereby resulting in an increase in operating income from $52,020 to $55,080.
   (2) Sales remain constant, but Adams reduces expenses, resulting in an increase in operating income from $52,020 to $54,060.
   (3) Adams is able to reduce its invested capital from $510,000 to $408,000 without affecting operating income.

Complete this question by entering your answers in the tabs below.

• Req A to C
• Req D

Compute Adams’s profit margin, turnover and return on investment for 2018. (Round "Profit margin" and "Return on investment" to 1 decimal place.)

a.	Profit margin		%
b.	Turnover		times
c.	Return on investment		%

Recompute Adams’s ROI under each of the following independent assumptions: (Do not round intermediate calculations. Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45).)

1. (1) Sales increase from $1,020,000 to $1,224,000, thereby resulting in an increase in operating income from $52,020 to $55,080.

   (2) Sales remain constant, but Adams reduces expenses, resulting in an increase in operating income from $52,020 to $54,060.

   (3) Adams is able to reduce its invested capital from $510,000 to $408,000 without affecting operating income.

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Return on Investment
(1)		%
(2)		%
(3)		%

Answer 1

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