BARR reported the following 2019 financial information: Sales = $5,200,000; Contribution margin = $600,000; Segment income...
BARR reported the following 2019 financial information: Sales = $5,200,000; Contribution margin = $600,000; Segment income = $430,000; Average investment = $1,000,000; The company's cost of capital was 12%.
-The segment profit margin ratio (return on sales) is?
-The asset turnover is?
-The return on investment (ROI) for the BARR is?
-Residual income for the BARR is?
Homework Answers
Segment profit margin ratio = Segment income / Sales
= $430,000 / $5,200,000
= 8.3%
Assets turnover = Net sales / Average total assets
= $5,200,000 / $1,000,000
= 5.2
Return on investment = Segment income / Investment
= $430,000 / $1,000,000
= 43%
Residual Income = Operation income - (Minimum required rate of return * Average assets)
= $430,000 - ($1,000,000 * 12%)
= $430,000 - $120,000
= $310,000
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