Question

Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the following income statement for the last year: Sales $786,640,000 Less: Variable expenses 543,024,000 Contribution margin $243,616,000 195,036,000 Less: Fixed expenses Operating income $48,580,000 At the beginning of last year, Elway had $38,624,000 in operating assets. At the end of the year, Elway had $41,371,000 in operating assets. Required: 1. Compute average operating assets. 2. Compute the margin (as a percent) and turnover ratios for last year. If required, round your answers to two decimal places. Margin Turnover 3. Compute ROI as a percent. Use the part 2 final answers in these calculations and round the final answer to two decimal places. 4. ROI measures a company's ability to generate relative to its investment in assets. The greater the ROI, the efficiently the company is generating from its assets.

Answer 1

1	Average operating assets =	(Opening assets + Closing assets)/2
	=	($38,624,000 + $41,371,000)/2
	=	39,997,500
2	Margin =	Operating income/Sales
	=	$48,580,000/$786,640,000
	=	6.18%
	Turnover =	Sales/Average operating asset
	=	$786,640,000/$39,997,500
	=	19.67
3	ROI =	Margin x Turnover
	=	6.18% x 19.67
	=	121.56%