Question

Comparative data on three companies in the same service industry are given below.

Required:

2. Fill in the missing information. (Round the "Turnover" and "ROI" answers to 2 decimal places.)

	Company A B C Sales $3,724,000 $1,375,000 Net operating income $633,080 $206,250 Average operating assets $1,960,000 $2,700,000 Margin % % 6 % Turnover 2.50 Return on investment (ROI) % 7.50 % %

Answer 1

	Company
	A	B	C
Sales	3724000	1375000	6750000
Net operating income	633080	206250	405000
Average operating assets	1960000	2750000	2700000
Margin	17%	15%	6%
Turnover	1.90	0.50	2.50
Return on investment (ROI)	32.30%	7.50%	15.00%

Working:

Company A:

Margin = Net operating income/Sales = $633080/$3724000 = 17%

Turnover = Sales/Average operating assets = $3724000/$1960000 = 1.90

ROI = Margin x Turnover = 17% x 1.90 = 32.30%

Company B:

Margin = Net operating income/Sales = $206250/$1375000 = 15%

ROI = Net operating income/Average operating assets

Average operating assets = Net operating income/ROI = $206250/7.50% = $2750000

Turnover = Sales/Average operating assets = $1375000/$2750000 = 1.90

Company C:

ROI = Margin x Turnover = 6% x 2.50 = 15%

Turnover = Sales/Average operating assets

Sales = Turnover x Average operating assets = 2.50 x $2700000 = $6750000

Margin = Net operating income/Sales

Net operating income = Margin x Sales = 6% x $6750000 = $405000