Question

Gabbe Industries is a division of a major corporation. Last year the division had total sales of $19,293,750, net operating income of $2,267,016, and average operating assets of $8,575,000. The company's minimum required rate of return is 20% Required: a. What is the division's margin? (Round your percentage answer to 2 decimal places.) b. What is the division's turnover? (Round your answer to 2 decimal places.) c. What is the division's return on investment (ROI)? (Round percentage your answer to 2 decimal places.) a. Margin b. Turnover Return on investment C.

2.

Answer 1

Question 1 (a) Margin : Net Operating Income / Sales Net Operating Income (A) Sales (B) $ 2,267,016.00 $ 19,293,750.00 Margin = A/B 11.75% (b) Turnover : Sales / Average Operating Assets Sales (A) Avg Operating Assets (B) $ 19,293,750.00 $ 8,575,000.00 Turnover = A/B 2.25 Times [C] Return on Investment : Net Operating income / Avg Operating Assets Net Operating Income (A) Avg Operating Assets (B) $ 2,267,016.00 $ 8,575,000.00 Return on Investment = A/B 26.44%

Return on Investment : Net Operating income / Avg Operating Assets Net Operating Income (A) Avg Operating Assets (B) $ 540,800.00 $ 2,392,000.00 Return on Investment = A/B 22.61%

Turnover : Sales / Average Operating Assets Sales (A) Avg Operating Assets (B) $ 26,720,000.00 $ 7,400,000.00 Turnover = A/B 3.61 Times