Profit Margin, Investment Turnover, and ROI Briggs Company has operating income of $36,000, invested assets of...
Profit Margin, Investment Turnover, and ROI
Briggs Company has operating income of $36,000, invested assets of $180,000, and sales of $720,000. Use the DuPont formula to compute the return on investment.
| a. Profit margin | % | |
| b. Investment turnover | ||
| c. Return on investment | % |
Homework Answers
(1)
profit margin = operating income/sales
= $36000/$720000
= 5%
(2)
investment turnover = sales/invested assets
= $720000/$180000
= 4 times
(3)
as per DuPont formula,
return on investment = ROI = (Operating income/Sales) X (Sales/Invested Assets)
= profit margin x investment turnover
= 5% x 4
= 20%
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