Question

Fanning Corporation's balance sheet indicates that the company has $550,000 invested in operating assets. During 2018, Fanning earned operating income of $60,500 on $1,100,000 of sales. Required a. Compute Fanning's profit margin for 2018. b. Compute Fanning's turnover for 2018. c. Compute Fanning's return on investment for 2018. d. Recompute Fanning's Rol under each of the following independent assumptions: (1) Sales increase from $1,100,000 to $1,320,000, thereby resulting in an increase in operating income from $60,500 to $67,320. (2) Sales remain constant, but Fanning reduces expenses, resulting in an increase in operating income from $60,500 to $62,700. (3) Fanning is able to reduce its invested capital from $550,000 to $440,000 without affecting operating income. Complete this question by entering your answers in the tabs below. Req A to C ReqD Compute Fanning'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 c. Return on investment times

Answer 1

Given i Accet - 8550000 1 60500 Investment in operciting operating Income Cales $ 1,100,000 (a) fanning Profit margin for 2018 Profit margin = Profit / operating Income xloo sales/ Turnover = 60500 x 100 a 55% 1200000 (6) fanning's Turnover for the year 2018 Turenover & sales bence, Tuapver for the year endead is Turnovere & 1100000. 2018 (C) fanning's Return on Investment Return on ruvestment- (Ref. Returam / Net Investment oferecting quote 60500 xloo 550000 11%

- (d - 1) fanning's Rot under different situations Sales Iucereast to & 1320000 and operating to $ 673,99 Income Opereating Income 867320. - operating / Investment - $ 550000 Rola operating Income / Return Investment =) 67320 x100 & 12.24 %. 550000 3 (2) when operating Income become $62.700. lolz Return 2) 62700 x 100 2 Investment 550000 1194) • Note! we knoco that for is effected by / Retuan and not by Sales Hence in questions operating Income is relevante operating these Income • (3) • Fanning is able to fedue its Investment to $44000 o Return on Investment & Return xoo Investment 2) $60500 7 13+75% $ 44000 is dependent on "Return" and "Investment". - fol