Profit Margin, Investment Turnover, and return on investment The condensed income statement for the Consumer Products...

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Profit Margin, Investment Turnover, and return on investment The condensed income statement for the Consumer Products Divisio

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Answer 1

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a.	Profit margin = Income from operations/Sales = $531300/$1518000 = 35%
	Investment turnover = Sales/Total assets = $1518000/$2530000 = 0.6
	Rate of return on investment = Profit margin x Investment turnover = 35% x 0.6 = 21%

b.	Income from operations = $531300 + $75900 = $607200
	Profit margin = Income from operations/Sales = $607200/$1518000 = 40%
	Investment turnover = Sales/Total assets = $1518000/$2530000 = 0.6
	Rate of return on investment = Profit margin x Investment turnover = 40% x 0.6 = 24%

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